Among traders, George Soros is a legend for making big bets that pay off. His most famous trade — a bet against the Bank of England — made him $1 billion in one day. Since then, Soros has added to his wealth with other timely market calls.

Soros analyzes global economic trends and often takes positions when he suspects a trend has gone too far. Few traders have the ability to process information in the way that Soros does, and even fewer have the courage of conviction needed to act quickly and decisively on their analysis.#-ad_banner-#

Japan is the latest example of Soros’ investment process. The Wall Street Journal reports that he is using the recent drop in Japan’s stock prices to buy. He is also shorting the yen after its recent rise. A weaker yen would help Japanese exporters increase their profits and is bullish for the country’s stocks.

Soros hasn’t confirmed the rumors, but there are some attractive large-cap companies with headquarters in Japan available to traders in the United States. These are stocks with strong cash flow and high relative strength (RS), and they are buys under a trading system I developed and described several weeks ago.

When applied to Soros’ holdings, the system rules would have delivered an average annual gain of 17.3% a year over the past 10 years while the S&P 500 gained 5.3%. The worst loss an investor suffered with the system would have been 24%; the S&P 500’s biggest loss was more than 55%.

Taking a page from Soros’ book, I’m applying my system to Japanese ADRs. Here are the three stocks my system is signaling to buy right now.

Toyota (NYSE: TM) could be among the most profitable ways to benefit from the expected fall of the yen. The company’s expectations are quite a bit more optimistic than analysts‘. In the year ending March 2014, Toyota expects a 42% increase in net income. Analysts are looking for an increase of only 7.5%.

Using analysts’ estimates for earnings, TM is still one of the most undervalued stocks in the market. The PEG ratio compares the price-to-earnings (P/E) ratio to the expected growth rate of earnings per share (EPS). This ratio is fairly valued at 1, and stocks are considered undervalued when the PEG ratio is less than 1. With a PEG ratio of 0.33, TM could more than double from recent prices.

Financial powerhouse Nomura Holdings (NYSE: NMR) is also undervalued with a PEG ratio of only 0.2. Analysts expect earnings growth to more than double, on average, every year for the next five years. Nomura struggled through the global financial crisis and reported large losses in 2008 and 2009, but the company has been recovering since then, along with other large financial institutions, and is a buy based on growth in cash flow and price.

Electric power tool maker Makita (OTC: MKTAY) is also a turnaround play. The company has seen earnings slip an average of 6.5% a year over the past five years while free cash flow expanded at a rate of 82% a year. Strong cash flow has allowed the company to maintain a balance sheet free of long-term debt. This probably helped the stock price hold up during the recent sell-off.

The RS chart below shows that MTKAY outperformed in the first weeks of June. If the Japanese market does move higher, as Soros seems to expect, MKTAY should be among the best performers.

With his actions, Soros is showing that he believes the bull market Japan has enjoyed since late last year is not over yet. These three high-quality companies headquartered in Japan might be the best way to invest alongside the fabled money manager, and take advantage of the country’s recent sell-off.

This article originally appeared on ProfitableTrading.com.
If I Could Buy Any Stocks to Follow George Soros Into Japan, These Would be Them

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