(Bloomberg) — Market watchers are saying that Warren Buffett may be looking to buy Japanese financial firms and shipping companies as Berkshire Hathaway Inc.’s return to the yen bond markets fuels speculation he’s raising money to build stakes in value stocks.
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The billionaire’s company this week mandated banks to manage a yen bond sale in the global market, in a sign he may increase holdings in Japan. Most of his previous investment in Japanese equities was financed through yen bonds, Buffett said in his annual letter in February.
Eiji Kinouchi, chief technical analyst at Daiwa Securities Co., sees potential for insurers and shippers to be Buffett’s next picks. While trading companies rose on news of the bond sale, they did not beat the broader market by a wide margin, he wrote in a research note this week. Instead, shippers and insurance stocks have been some of the top gainers in the Topix since August and may fit Buffett’s value investment strategy, he said.
“If it’s not a trading company, it will have a big impact on the whole market,” Kinouchi said.
The renewed presence of Buffett, known as the Oracle of Omaha, may provide a cheer for Japanese stocks as his endorsement to the five major trading houses helped propel the Nikkei 225 Stock Average to a record high earlier this year. Should Berkshire’s choice widen to other sectors, it will be a supporting factor for a market that’s seen intense volatility in recent months due to political uncertainty and currency fluctuations.
Berkshire didn’t immediately respond to a request for comment outside of regular hours in the US.
Valuations of Japanese banks and insurance companies have fallen after a massive selloff in the wider market in August. The estimated price-earning ratios for the Topix insurance and bank indexes are at 9 and 10.1, respectively, compared with 12.1 and 12.4 in early July when the broader gauge hit an all-time high.
Takashi Ito, a senior strategist at Nomura Securities Co., also said there’s a good possibility that Buffett will buy financial shares. “Fundamentals are strong in Japan’s financial sector, and that’s in line with Buffett’s standards,” he said.
A share screening by Nomura’s strategists including Tomochika Kitaoka found that Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Trust Group Inc. and Sompo Holdings Inc. are among financial firms that align with the characteristics of Berkshire’s portfolio.
The shift in Bank of Japan policy toward interest rate hikes will improve profit margins in the sector, Ito said.
That said, some Buffett watchers expect his focus to remain on trading houses given Berkshire’s recent sale of Bank of America Corp. shares.
“I can’t think of him buying Japanese bank stocks when he is selling that sector in the US, a market he understands well,” said Mineo Bito, president and chief executive officer of Bito Financial Service Co., who frequently attends Berkshire’s shareholder meetings in Omaha, Nebraska.
–With assistance from Yasutaka Tamura.
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