Nikkei 225 Index

A pedestrian walks past a stock market indicator board in Tokyo. European Pressphoto Agency

Languishing in the summer heat, the Japanese stock market looks dull if not downright stagnant these days. After an eye-popping 57% surge last year, the benchmark Nikkei Stock Average appears to have lost much of its earlier momentum, not deviating far from its current levels over the past few months.

With the index stuck in a holding pattern, on-year trading volume has steadily declined every month as the markets lack of clear direction makes it difficult for investors to take a stance.

While it’s easy to imagine how tough it must be for a stock brokerages to prosper under these circumstances, some investors and analysts say thats not really the case.

They say that beneath the Nikkei 225s under-performance secular growth stories are catching on in several corners of the market. offering plenty of potentially lucrative investing opportunities.

Unlike last year when the Bank of Japan’s easing gave a big boost to the entire market, the recent focus is on individual companies and themes that prosper on their own merits. In fact, there are a significant number of individual stocks that are generating attractive returns, said Yoshinori Shigemi, a global market strategist at J.P. Morgan Asset Management. He noted that the share prices of about 800 companies on the Topix index of all the Tokyo Stock Exchange First Section issues are outperforming the S&P 500 in dollar terms year to date.

Matthew Brett, who co-manages £4.7 billion ($7.8 billion) in Japanese equities at Baillie Gifford & Co in Edinburgh, said Internet. factory automation and labor market reforms are among the few themes his team builds its portfolio around. Rakuten Inc. Keyence Corp. Yaskawa Electric Corp. and Temp Holdings Co. Ltd. are likely beneficiaries, he added.

Some brokerages are going to put this individual stocks theory to the test. At its annual Japan conference in September, Bank of America Merrill Lynch will set up more than 30 thematic small sessions for the first time, in addition to its traditional corporate executive presentations and one-on-one sessions between company representatives and investors. The conference will offer up a number of topics ranging from transitions in the robotics industry and driverless cars to the start of the overhaul of the hospital industry.

“More bottom-up, fundamental analysis is the key for 2014,” said Gary Okamoto, who leads Japan equity sales at Bank of America Merrill Lynch.