Billionaire investor Warren Buffett’s recent interest in Japanese investments is beginning to pay off already as the investments bring in a small fortune.
Key Details
- Buffett, known for making excellent stock picks, recently invested in several Japanese trading houses.
- In an interview with a Japanese business publication Nikkei, Buffett shared his intention to continue Berkshire Hathaway’s investment in Japanese stocks.
- Recently, Buffett increased the firm’s stake in the five major Japanese trading companies—Itochu, Marubeni, Mitsui, Mitsubishi, and Sumitomo, The Wall Street Journal reports.
- The investor later said he is considering other opportunities in Japan.
Why it’s news
Buffett’s initial investment surprised some analysts as the trading houses are considered old-fashioned compared to flashy tech stocks. However, Buffett’s financial moves often have long-term benefits.
So far, the investment is paying off. Since Berkshire disclosed the investments in August 2020, shares of the five companies have more than doubled, The Wall Street Journal reports.
These companies own a broad portfolio with investments reaching from mining to energy. The investments have benefited from increasing commodity prices over the last year, boosting the stock price and marking the beginning of another win for Buffett.
This investment closely resembles Buffett’s long-time practice of value plays. The five companies trade near their book value and around six times their earnings, on average. Like many of their Japanese counterparts, the stocks frequently return cash to shareholders and consistently produce strong cash flow.
There may be other investment opportunities in the Japanese stock market. “Japan’s Topix index trades at 13.3 times expected earnings, slightly below its 10-year average of 14.8 times, according to S&P Global Market Intelligence. That compares with 18.9 times for the S&P 500. Many companies are sitting on net cash, and their stocks are trading below book value,” The Wall Street Journal’s Jacky Wong reports.
