A Portfolio To Profit From Japan's Quantitative Easing

Motif Investing constantly looks for “trends, ideas and world events that could create an investment opportunity.”
It then picks 10 to 30 related stocks to build portfolios around, weighing them based on their exposure to the coinciding idea, event or trend.
Among the site’s market-beating portfolios, investors can find one composed by US listed securities of Japanese companies that benefit from the quantitative easing (QE) program in place in the country.

In the aftermath of the global financial crisis, the US Federal reserve implemented 3 rounds of quantitative easing, which –Motif assures- “helped propel the stock market to record highs as of January 2014.”

In an effort to fuel its own economy, Japan’s central bank has done the same. The country’s quantitative easing program, carried out by Prime Minister Shinzo Abe, reached about 101 trillion yen.

Bring On Inflation!

As people at Motif explain, “Japan’s QE effort is the equivalent of triple the American endeavor on a comparative GDP basis. Since the program was announced in November 2012, the Nikkei is up almost 75 percent: while labor cash earnings, a benchmark for wages, are projected to increase 0.6 percent in the year starting April 1, 2014.”

In addition, the program has impacted on the Japanese currency in the desired way. The Yen depreciated by almost 30 percent, providing higher returns for US-based investors.

So, this motif includes “stocks of Japanese ADRs as well as a currency hedge to protect against the depreciation in the Yen.”

Performance And Allocation

The Japan QE motif has managed to beat the S&P 500 both over the past year and past month, returning 13.9 percent and 5.7 percent, respectively, versus the S&P's 0.43 percent decline and 1.34 percent surge – for the last year and last month correspondingly.

In terms of allocation, 33.1 percent of the portfolio's assets are placed in a currency hedge, 23.7 percent in Japanese technology companies, 22.2 percent in industrials and transportation stocks and 21.0 percent in financial firms.