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Japanese stocks have rebounded from last week’s sell-off, and investment firm Bernstein sees hope for the future, recommending specific trading strategies and listing stocks rated as overweight. Japan’s broad Topix index plunged 12.23% on August 5, while the benchmark Nikkei 225 fell 12.4% – the biggest drop since “Black Monday” in 1987. Both indexes have since recovered some of their losses, with the Topix and Nikkei rising 2.83% and 3.45%, respectively, on Tuesday. “The market may have bottomed in the short term; recent dovish comments from the Bank of Japan (BOJ) may stem the winds of forced profit taking,” analyst Rupal Agarwal noted, referring to past crises. “This sharp pullback provides an excellent opportunity for long-term investors to get back into Japanese equities as structural factors have never been broken,” she added in an August 8 research note. “However, we expect the market to remain volatile given broader macro and political uncertainties, rising equity risk premiums and slowing earnings revision trends.” Here are four stocks from the investment bank’s defensive screen, which are listed on the Tokyo Stock Exchange. They also trade in the U.S. as American Depositary Receipts. They all stand out for having huge upside potential, according to FactSet’s consensus price targets. Stocks trading at “deep discounts” Names in the bank’s screen include video game company Nintendo. The company made headlines after revenue and profit plunged in the first quarter due to declining sales of its aging Switch console. Nintendo’s shares plunged after the announcement, but are still up 5.3% year to date. Fourteen of 25 analysts give the stock a buy or overweight rating, eight give a hold rating and three give an underweight or sell rating, according to FactSet. The average price target on the stock is 7,750 yen ($52.5), which suggests upside of about 19%. Other companies on the list include video game company Capcom, electronics maker Keyence Corp and entertainment company Bandai Namco Holdings. Analysts on average see more than 19% upside for Capcom, nearly 24% for Keyence and 22.5% for Bandai Namco, according to FactSet. — CNBC’s Michael Bloom, Charmaine Jacob and Arjun Kharpal contributed to this report.
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