SNE (Sony Corporation)

I said I will not recommend any stocks on this blog, but I will look at certain stocks to make some short analysis and comparison.

Today I am looking at Sony Corporation (SNE) traded on New York Stock Exchange (NYSE). I deliberately chose the stock traded on NYSE to reflect the idea better.

SNE opened today at $30.95 which is 7.5% lower from the closing price on Friday. Of course, this is due to earthquake and tsunami catastrophe that hit Japan on Friday. Sony is a Japanese company and all Japanese stocks have been influenced by this terrible catastrophe.

Sony Corporation has little to do with the earthquake and its price shouldn't be influenced so much by this event. Their global headquarters are in Tokyo and they haven't been effected by the earthquake nor tsunami. Most of its production is outside of Japan, media reports that Sony has 10 plants in Japan and that they are closed due to power shortages, which is true, however they are small operation centers and have little to do with production of bigger consumer products which are mostly produced in China. Six out of this ten plants are currently offline due to power shortages, one plant was damaged by tsunami.

We now have 3 Nuclear power plants that have now been effected by tsunamis. However, we have to keep in mind that Japan has 53 nuclear power plants, 3 have been damaged and 1 is offline, therefore we have 49 power plants that are working. I am sure the power shortage that now in Japan effect some one million people will be sorted out very soon.

Investors fear that Sony plants will be offline for more than few weeks according to some media, and this will cause significant loss to its production. Again, small production of micro-chips and research centers were effected by the earthquake, majority of larger consumer products like TV sets and computers are produced in China. All these factors create fear and investors are now dominated by fear concerning not just Japanese stocks but also European and American companies.

People's psychology works this way, they think like a herd, and they either overbuy or oversell the stock based on certain events.

Imagine a Japanese farmer owning a land with cattle in Peru (which many Japanese farmers actually do). How can you justify that the price of his land and his cattle decreases by 7.5% due to a disaster in Japan? Answer is simple, you can't. This exactly the case of Sony today.

Finding value has a lot to do with herd mentality, observe what people are doing, like today for example, and you will most often find some value in stocks.

On other note, my parents are journalists, my father has visited over 40 nuclear power plants in the United States, Canada and France during his career. So I was influenced in some way by nuclear power and journalism during my life. Media is doing a terrible job reporting on nuclear "disaster" in Japan, there is a huge difference between what happened and what media is trying to say "may" happen. Nuclear power plants are one of the toughest built structures, if not the toughest. There is absolutely no danger, or I should say the danger is so small that the reactors will explode and that a nuclear disaster will unleash that it doesn't deserve such a dramatic portrayal by mainstream media.

All our thoughts are with Japan and its wonderful people!

Damian Kosutic