Market watchers said Warren Buffett may be considering acquisitions of Japanese financial firms and shipping companies as Berkshire Hathaway Inc's return to the yen bond market fueled speculation that he is raising funds to build holdings in value stocks.
The billionaire's firm this week commissioned banks to manage yen-denominated bond sales in global markets, a sign he may increase his holdings in Japan. Buffett said in his annual letter in February that most of his previous investments in Japanese stocks were financed through yen-denominated bonds.
Berkshire Hathaway hired Bank of America Securities and Mizuho Securities to issue senior unsecured bonds denominated in yen. The company has been a regular issuer of yen notes since 2019, with the last such issuance in April. The company's fundraising plan is being closely watched by stock market investors after Buffett's purchase of shares in Japanese trading companies helped push the Nikkei 225 index to a record high.
Eiji Kinouchi, chief technical analyst at Daiwa Securities, believes that insurance companies and shipping companies have the potential to become Buffett's next targets.
He wrote in a research note this week that while trading companies rose on news of the bond sales, they did not outperform the broader market by a wide margin. Instead, shipping and insurance stocks have been the biggest gainers in the Topix since August and may fit Buffett's value investing strategy.
“If this wasn’t a trading company, it would have a significant impact on the entire market,” Kinouchi said.
The return of Buffett, known as the Oracle of Omaha, to Japan could boost stocks after his endorsement of five major trading firms helped push the Nikkei 225 to a record high earlier this year.
If Berkshire's investment scope expands to other sectors of the Japanese stock market, it will be a factor supporting the market, which has experienced sharp fluctuations in recent months due to political uncertainty and currency fluctuations. Berkshire did not immediately respond to a request for comment.
In U.S. stocks, Buffett continued to reduce his stake in Bank of America, but at a slower pace, with the sales prices among the lowest since he began his aggressive sell-off in mid-July.
According to Wednesday's filing, Berkshire Hathaway sold $338 million worth of Bank of America shares, with an average price of $39.40 per share on Tuesday and Wednesday. This is the company's 13th round of selling, and in the past few months, each round (usually lasting three days) has averaged about $750 million.
Buffett, 94, did not explain why he reduced his stake in Bank of America. Berkshire Hathaway remains the bank's largest shareholder, still holding a 10.2% stake worth more than $31 billion.
Valuations of Japanese banks and insurers have fallen after a sharp sell-off in the broader market in August. The forward price-to-earnings ratios of the Topix insurance and bank indexes are 9 and 10.1, respectively, compared with 12.1 and 12.4 when the broader indexes hit record highs in early July.
Takashi Ito, senior strategist at Nomura Securities, also said Buffett is likely to buy financial stocks. "The foundation of Japan's financial sector is strong, which meets Buffett's criteria," he said.
A stock screen by Nomura Securities strategists including Tomochika Kitaoka found that financial companies such as Mitsubishi UFJ Financial Group, Sumitomo Mitsui Trust Group and Sumitomo Mitsui Marine and Fire Insurance Company fit the characteristics of Berkshire's portfolio.
Ito said a shift in Bank of Japan policy toward higher interest rates would boost profit margins in the industry.
Still, some Buffett watchers expect him to continue his focus on trading companies given Berkshire's recent sale of Bank of America shares.
“I don’t think he’s going to buy Japanese bank stocks while selling U.S. bank stocks because the U.S. market is a market he knows very well,” said Mineo Bito, president and CEO of Bito Financial Services and a frequent attendee of Berkshire shareholder meetings in Omaha, Nebraska.
The article is forwarded from: Jinshi Data
