3 october 2024 : Market analysts suggest that Warren Buffett may be considering investments in Japanese financial firms and shipping companies, as Berkshire Hathaway Inc. returns to the yen bond market, raising speculation that he is preparing to increase his stakes in value stocks.
This week, Buffett’s company engaged banks to manage a yen bond sale in the global market, indicating a potential expansion of holdings in Japan. Previously, Buffett mentioned that most of his investments in Japanese equities were funded through yen bonds, as noted in his annual letter in February.
Eiji Kinouchi, the chief technical analyst at Daiwa Securities Co., believes that insurers and shipping companies could be Buffett’s next targets. While trading companies saw a rise following the bond sale news, they did not significantly outperform the broader market, according to his research note. In contrast, shipping and insurance stocks have been among the top performers on the Topix index since August, aligning with Buffett’s value investment strategy.
Buffett’s renewed engagement, often referred to as the Oracle of Omaha, could boost Japanese stocks, similar to how his endorsement of five major trading houses helped the Nikkei 225 Stock Average reach record highs earlier this year. If Berkshire expands its focus to other sectors, it could support a market that has experienced significant volatility recently due to political uncertainties and currency fluctuations.
Berkshire Hathaway did not respond to requests for comments outside regular US hours.
After a substantial market selloff in August, valuations of Japanese banks and insurance companies have decreased. Currently, the estimated price-earnings ratios for the Topix insurance and bank indexes stand at 9 and 10.1, respectively, down from 12.1 and 12.4 in early July when the broader market peaked.
Takashi Ito, a senior strategist at Nomura Securities Co., indicated that there is a strong likelihood that Buffett will invest in financial shares, noting that the fundamentals of Japan’s financial sector align with Buffett’s investment standards.
Nomura’s strategists, including Tomochika Kitaoka, identified Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Trust Group Inc., and Sompo Holdings Inc. as financial firms that fit Berkshire’s portfolio characteristics.
Ito mentioned that the Bank of Japan’s shift toward interest rate hikes will enhance profit margins within the financial sector.
However, some analysts familiar with Buffett’s strategies believe he may continue to focus on trading houses, especially after Berkshire’s recent sale of Bank of America Corp. shares.
“I find it hard to believe he would invest in Japanese bank stocks when he’s selling off that sector in the US, a market he understands well,” said Mineo Bito, president and CEO of Bito Financial Service Co., who often attends Berkshire’s shareholder meetings in Omaha, Nebraska.