The Motley Fool offers our deepest sympathies and best wishes to all those who have been and will continue to be affected by the terrible tragedy in Japan. There are no words to describe the shock and horror we've all no doubt felt by seeing events unfold there.
Despite this disaster of unimaginable proportion, the Tokyo stock exchange opened today, reflecting Japan's firm resolve to carry forward and onward as quickly as possible. The large sell-off that occurred today is an obvious indicator that the global economy will need to adjust to profound economic ramifications from the damage inflicted upon Japan, a nation that produced $5.4 trillion in GDP last year, accounting for 8.7% of global GDP. With that in mind, let's take a cursory look at what companies may be in for hard times ahead, and those that might see some benefit in the post-disaster global economy.
As with any natural disaster, the first sector to usually be picked apart by traders is insurance. Aflac appears to have dodged a bullet because it does not engage in property and casualty underwriting in Japan, but does derive the majority of its revenue within the country. AIG
The automotive sector could be driving down a slippery path considering many of Japan’s auto manufacturers have reduced production or closed their plants entirely. One of the hardest hit Japanese companies listed in the U.S. is Toyota Motor
Technology stocks however may face the most immediate impact, particularly those based in Taiwan that rely on Japanese parts in the manufacturing process. AU Optronics
Construction-related companies are likely the most logical choice to benefit from Japan’s rebuilding process. Heavy machinery provider Caterpillar
Energy providers are a mixed bag, but overall the outlook for the sector appears bullish. Nuclear power accounts for nearly one-third of all power generation, so it appears that nuclear operators and alternative energy providers may both benefit. Japan-based Hitachi
Short-term winners can also be found locally. Refiners in general could oddly benefit from this tragedy. Refiners had been facing considerable oversupply problems in Cushing, Okla., but those problems seem to be lifting after many of Japan’s refineries have been shut down. Valero Energy, Tesoro, and Western Refining are three names that could directly see an uptick in earnings based on this slowdown in output.
Don't discount the impact environmental cleanup companies could have as well. It remains to be seen who may step up to fill this role in Japan, but I wouldn’t be surprised to see a company like Clean Harbors, who played a critical role in cleanup efforts in 2005 after Hurricane Katrina, trend higher in the interim.
Finally, it pays to note just how important of a role social media played in getting news and information out of Japan when standard telephone and Internet access was nonfunctional. Facebook, Twitter, Google’s YouTube, and to a lesser extent Skype, have played a tremendous role over the past few days in connecting families and providing first-hand accounts of conditions in Japan that simply dwarfed the coverage of larger media networks. It appears Goldman Sachs’ investment in Facebook is looking a lot smarter than I initially thought.
The big picture
The big picture here remains cloudy because Japan is still dealing with countless humanitarian issues and the aftereffects of the disaster, including a potentially grave nuclear crisis -- its future prospects could change dramatically over the next few months. These scenarios can at least serve as a starting point for further research into the companies mentioned here, and provide some analysis of how this event could affect your portfolio.
What’s your take on Japan’s economy going forward? Will it be able to recover quickly or could this earthquake cripple the economy? Share your thoughts on this and the companies mentioned above in the comments section below and consider tracking these stocks, along with your own portfolio with My Watchlist.