Top Picks 2020: Rakuten (RKUNY)

01/15/2020 5:00 am EST

Focus: CONSUMER

Carl Delfeld

Chief Analyst, Cabot Global Stocks Explorer

Japan is a market that has been out of favor but has many fine companies at the heart of Asian growth trading at dirt-cheap valuations, observes Carl Delfeld, editor of Cabot Global Stocks Explorer.

Rakuten is a well-diversified blue-chip conglomerate with tentacles throughout Japan and has plenty of running room for international expansion. Its loyalty membership program is more than 100 million strong and it is Japan’s #1 Internet bank, #1 credit card and one of the country’s leading travel platforms.

Rakuten (RKUNY) is the 7th most visited website in Japan with 490 million visitors in September with an average length of visit of over six minutes. The company’s core business is as an Internet sales platform akin to Amazon (AMZN) with its market share in Japan at about 25%.

Rakuten is also launching a 5G network in the first half of 2020. It already has a large number of e-commerce cloud sites built with high-speed fiber connections in Japan.

This offers the firm natural expansion capabilities into virtual mobile networks and 5G. If successful, this investment will put the company in a strong position in Japanese telecoms.

Rakuten is a growth conglomerate with multiple drivers and a sterling balance sheet. And the stock is trading at just ten times trailing earnings, booked a 16% increase in revenue during its latest quarter, and offers an impressive 19% return on equity.

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