Sony Corporation (ADR) (SNE), Toyota Motor Corporation (ADR) (TM), Honda Motor Co Ltd (ADR) (HMC): How to Play the Japanese Yen the Shinzo Abe Way

Toyota Motor Corporation (ADR) (NYSE:TM) Company reported an 18.7% increase in revenue in its latest quarterly release. The company also reported a 239.3% increase in its net-income. To be fair, the company reported strong durable goods demand, which was also reflected in Ford’s earning report. The USD/JPY currency market manipulation helped to boost Toyota Motor Corporation (ADR) (NYSE:TM)’s stock price by 32.64% since the beginning of the year.

Honda Motor Co Ltd (ADR) (NYSE:HMC) hasn’t reported earnings for the first quarter of 2013, so it’s unclear as to exactly how much the currency market has affected the company’s performance. But both Sony Corporation (ADR) (NYSE:SNE) and Toyota Motor Corporation (ADR) (NYSE:TM) were able to report an additional 15% in year-over-year growth from foreign exchange effects alone, so it is likely that Honda Motor will be able to advance its top-line revenue by an additional 15%.

Source: Ycharts

The currency market fluctuations will heavily favor Honda Motor Co Ltd (ADR) (NYSE:HMC)’s earnings results for the 1^st quarter. I estimate that Honda’s revenues will be inflated by 15% based on Sony Corporation (ADR) (NYSE:SNE)’s segment data. Honda Motor Co Ltd (ADR) (NYSE:HMC)’s stock advanced 5.97% since the beginning of 2013, which means that investors haven’t fully priced in the currency market effects. This may mean that the stock is trading below its intrinsic value.

Conclusion

The effects of the currency markets on the earnings performance of these firms has been humongous over the past quarter. That being the case, investors should consider purchasing stock in Japanese ADRs due to the currency market fluctuation. After all, it always helps to know that Shinzo Abe is on your side!

The article How to Play the Japanese Yen the Shinzo Abe Way originally appeared on Fool.com and is written by Alexander Cho.

Alexander Cho has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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