Another "big bargain" to pick up! Will Buffett take action this time?
"The Oracle of Omaha" Warren Buffett may take advantage of the opportunity presented by the decline in the stock prices of Japanese trading companies to increase his holdings. The value of these stocks held by Buffett evaporated by approximately 980 billion yen during the market crash, but as the Japanese stock market rebounds, the losses have narrowed to around 550 billion yen. If stock prices continue to fall, Buffett may purchase more shares. Furthermore, the price-to-earnings ratios of Marubeni and Mitsui & Co. held by Buffett have dropped to last year's levels, which may attract his investment. Buffett currently holds a record $276.9 billion in cash reserves, making it very easy for him to purchase Japanese stocks if he intends to do so
"Stock God" Buffett's favorite Japanese trading company's valuation has dropped, which may provide him with another opportunity to buy more stocks.
In the recent market plunge, as of Monday, the value of these stocks held by the "Stock God" has evaporated about 980 billion yen (6.7 billion U.S. dollars), but with the rebound of the Japanese stock market, as of the close on Wednesday, the loss has narrowed to about 550 billion yen.
Mineo Bito, President and CEO of Bito Financial Service Co., said, "If he can buy at a lower price, that would be a great bargain." Bito has been attending Berkshire Hathaway's shareholder meetings in Omaha, Nebraska since 2014.
According to data compiled by Bloomberg, Berkshire holds an average stake of 8.2% in Marubeni Corporation, Itochu Corporation, Sumitomo Corporation, Mitsui & Co., and Mitsubishi Corporation. In the recent sell-off, Marubeni and Mitsui & Co. experienced the largest declines, falling by 31% each. The trading companies' stock prices have fallen more than the broader market, as the market is concerned that a stronger yen will impact their overseas income.
As of Wednesday, the estimated P/E ratios of Marubeni and Mitsui & Co. have dropped to around 7.5 times and 9.1 times, which is similar to the levels when Buffett increased his holdings in these two stocks from April to June last year.
Hiroshi Namioka, Chief Strategist at Tokyo T&D Asset Management, said, "Buffett has been successful in value investing so far, perhaps he sees the current valuation of Japanese stocks as an opportunity."
Berkshire now has a record $276.9 billion in cash reserves after selling Apple stock in the second quarter, making it easy for him to buy some Japanese stocks if he wishes. Berkshire did not immediately respond to a request for comment.
The "Oracle of Omaha" first disclosed his holdings in Japanese companies in 2020 and stated that Berkshire will not acquire more than 9.9% of these companies' shares unless it obtains special approval from their boards. Reportedly, the investment company made $8 billion in profits from these five investments in February.
Buffett's endorsement of these companies' shareholder-friendly policies has helped Japanese stocks gain more global attention, with the Japanese stock market hitting a historic high in July. Some speculate that he may shift his focus to Japanese insurance companies and banks, but Bito believes that the billionaire will continue to focus on trading companies and seek ways to collaborate. Bito said:
"He really likes trading companies because they have a lot in common with Berkshire, they are diversified conglomerates. I don't think he will sell his Japanese stock holdings now."