Buffett Ramps Up Japan Stock Bets, Weighs Buying Even More

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(Bloomberg) — Warren Buffett is turning his focus back to Japan, with the billionaire investor telling Nikkei that he’s mulling a boost to his stock investments in the country shortly after Berkshire Hathaway Inc. kicked off a yen bond sale. 

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Shares of Japan’s major trading houses jumped after Buffett said he has raised his holdings in them to 7.4% from about 5% in 2020 and is looking to increase his exposure to the country’s stocks, according to the Nikkei report. 

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The 92-year-old Buffett is currently in Japan and plans to meet with different company leaders and “just have a discussion around their businesses and emphasize our support,” he told Nikkei, without naming the companies. 

In the interview, Buffett compared Japan’s five large trading houses to Berkshire and said he would do business with them. 

“We would love if any of the five would come to us ever and say, ‘We’re thinking of doing something very big or we’re about to buy something and we would like a partner or whatever,’” he said, according to Nikkei.

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He then added that while he doesn’t have a stake in other major Japanese companies, “there are always a few I’m thinking about,” Nikkei reported. 

Buffett’s interest is “a reminder that there are attractive and well-priced investment opportunities in Japan,” said Lorraine Tan, director of equity research at Morningstar Asia. “Given what we know to be his preferences, he would be looking for well-managed companies that enjoy economic moats which he thinks are undervalued.”

Officials at the company didn’t immediately respond to a request for comment on the Nikkei story. 

Japan’s trading houses — or “sogo shosha” — have deep roots in the country’s economy, dating back hundreds of years and providing everything from energy to food. 

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Value Stocks

Shares of Mitsubishi Corp., the biggest trading house, jumped as much as 3%, the most since March 1. Mitsui & Co. surged as much as 3.7%, while Marubeni Corp., Sumitomo Corp. and Itochu Corp. also edged higher. Japan’s Topix extended gains after news of the report.

Buffett’s remarks “may encourage foreign investors to invest in Japanese stocks, especially in value stocks,” Hiroshi Namioka, chief strategist at T&D Asset Management. 

Foreigners have net sold Japanese stocks and futures from the Tokyo Stock Exchange for the last three weeks following the international banking crisis in March, though they remain net buyers so far this year. Over the past 12 months, the MSCI Asia Pacific excluding Japan Index has dropped 8.6%, compared with a 0.8% decline in the broader Topix using dollar terms. 

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It’s not clear how long the market boost from his remarks to Nikkei will last. 

“Buffett’s investments a few years ago did not ignite the market much in the short term, other than for the stocks he chose or those much like them, but I believe that it had a moderately positive effect in the intermediate to long term regarding foreign perceptions of Japan’s market,” said John Vail, chief global strategist at Nikko Asset Management Co. adding that this would also support domestic optimism. 

Trading houses in Japan have already gained over the past year as companies such as Mitsui and Mitsubishi expanded buyback program plans in February. Company earnings have also been boosted by the higher energy prices. Shares of Japan’s largest trading company Mitsubishi are up 14% in the past year, compared to the broader Topix index which is up 5.4%. 

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Separately, Berkshire’s US holding company is set to price its new bonds as soon as this week, in what would be the first yen issuance from an overseas issuer since Kazuo Ueda took the helm at the Bank of Japan this month. The proceeds from the offering will be used for general corporate purposes, including refinancing some debt. 

The legendary investor’s company is offering wider credit spreads on tranches in the new deal than when it last tapped the market in December, as speculation about the BOJ pulling back on ultra-easy policy drove yield premiums higher this year. Still, Ueda signaled at his inaugural news conference Monday that any significant policy changes may be unlikely for the time being. 

Berkshire has already started marketing a seven-tranche bond sale, according to a person familiar with the matter. 

Omaha, Nebraska-based Berkshire is one of the largest foreign issuers of yen bonds, data compiled by Bloomberg show. The firm surprised Japanese markets in 2020 when it bought shares in local trading companies after selling one of the biggest-ever yen bond deals by an overseas company. 

—With assistance from Winnie Hsu, Yasutaka Tamura, Katherine Chiglinsky and Hideyuki Sano.