"Ammunition" is about to be in place! Has the "Stock God" Buffett found the next target?
Warren Buffett may be considering acquiring Japanese financial and shipping companies, as his company's return to the Japanese yen bond market has sparked market speculation. His company has entrusted banks to manage the sale of yen bonds, which may increase its holdings in Japan. Analysts believe that insurance and shipping companies may become the next investment targets. Buffett's investments may boost the Japanese stock market, especially against the backdrop of his earlier endorsement of the five major trading companies driving the Nikkei 225 index to a historic high
Market observers say that "Stock God" Buffett may be considering acquiring Japanese financial and shipping companies, as Berkshire Hathaway's return to the Japanese yen bond market has sparked speculation that he is raising funds to build a portfolio of value stocks.
The billionaire's company this week commissioned banks to manage yen bond sales in global markets, indicating that he may be increasing his holdings in Japan. Buffett stated in his annual letter in February that most of his previous investments in Japanese stocks were financed through yen bonds.
Berkshire Hathaway has hired Bank of America Securities and SMBC Nikko Securities to issue yen-denominated senior unsecured bonds. The company has been a regular issuer of yen notes since 2019, with the last issuance of such bonds in April. The company's fundraising plans are closely watched by stock market investors, as Buffett's previous purchase of shares in a Japanese trading company helped drive the Nikkei 225 index to record highs.
Eiji Kinouchi, Chief Technical Analyst at Daiwa Securities, believes that insurance and shipping companies have the potential to be Buffett's next targets.
In a research report this week, he wrote that while trading companies rose after the bond sale news, they did not outperform the market significantly. On the other hand, shipping and insurance stocks have been the best performers in the TOPIX index since August, potentially aligning with Buffett's value investment strategy.
"If it's not a trading company, it will have a significant impact on the entire market," Kinouchi said.
Known as the "Oracle of Omaha," Buffett's return to the Japanese market could boost the Japanese stock market, as his endorsement of the five major trading companies earlier this year helped propel the Nikkei 225 index to record highs.
If Berkshire's investment scope expands to other sectors of the Japanese stock market, it will be a supportive factor for the market, which has experienced significant volatility in recent months due to political uncertainty and currency fluctuations. Berkshire did not immediately respond to a request for comment.
In the U.S. stock market, Buffett continues to reduce his stake in Bank of America, but at a slower pace, with the selling price hitting a low since he began significant reductions in mid-July.
According to Wednesday's filing, Berkshire Hathaway sold $338 million worth of Bank of America stock, with an average selling price of $39.4 per share on Tuesday and Wednesday. This marks the 13th round of reductions, with each round (usually lasting three days) averaging around $750 million in recent months.
The 94-year-old Buffett did not specify why he is reducing his stake in Bank of America. Berkshire Hathaway remains the largest shareholder of Bank of America, holding 10.2% of the shares, valued at over $31 billion.
After a broader market sell-off in August, valuations of Japanese banks and insurance companies have declined. The expected price-to-earnings ratios for the TOPIX insurance and banking indices are 9 and 10.1, respectively, compared to 12.1 and 12.4 when the broader indices hit record highs in early July Nomura Securities' senior strategist Takashi Ito also stated that Buffett is very likely to buy financial stocks. "The foundation of the Japanese financial industry is very strong, which meets Buffett's criteria," he said.
Stock screening conducted by Nomura Securities' strategist Tomochika Kitaoka found that financial companies such as Mitsubishi UFJ Financial Group, Sumitomo Mitsui Trust Holdings, and Mitsui Sumitomo Insurance Company meet the characteristics of Berkshire's investment portfolio.
Ito stated that a shift in the Bank of Japan's policy towards raising interest rates will increase the industry's profit margins.
Nevertheless, some Buffett observers expect that, given Berkshire's recent sale of US bank stocks, he will continue to focus on trading companies.
"I don't think he will buy Japanese bank stocks when selling US bank stocks because the US market is a market he knows very well," said Mineo Bito, President and CEO of Bito Financial Services. He often attends the Berkshire Hathaway shareholders meeting held in Omaha, Nebraska