Buffett's investments in Japan

[schin]

Has anyone analyzed Buffett's purchases of japanese banks. I know he bought a basket. It is somewhat similar to how he approached his investment in US airlines.   Has anyone looked into the Japanese economy and what about it makes it interesting to Buffett? And specifically their banks. 

 

I've always know they were cheap, but don't understand what metrics makes it interesting to him now. I would love anyone's thoughts.

[throw123]

He never bought banks

[schin]

8 hours ago, throw123 said:

He never bought banks

 

I stand corrected. Their trading houses.

 

https://www.bloomberg.com/news/articles/2023-06-19/buffett-raises-stake-in-five-japanese-trading-houses

[Saluki]

Not very familiar with them, but I heard speculation that it might be a bet on commodities, in addition to a bet on Japan.  Apparently those "trading houses" in Japan operate like Cargill or Glencore, not like Merril Lynch, and have a lot of exposure to other economies in Asia. 

[nwoodman]

5 hours ago, Saluki said:

Not very familiar with them, but I heard speculation that it might be a bet on commodities, in addition to a bet on Japan.  Apparently those "trading houses" in Japan operate like Cargill or Glencore, not like Merril Lynch, and have a lot of exposure to other economies in Asia. 

Potential deal flow too.   Definitely some good crossover with Berkshire Energy. You probably saw the interview with Buffett and Able in Japan

[Dinar]

It's also a way to get cheap leverage.  He borrows in yen at what 1%?  Then buys assets at a 10% free cash flow yield.  If yen runs up against the dollar, he has a hedge.  

[schin]

5 hours ago, Dinar said:

It's also a way to get cheap leverage.  He borrows in yen at what 1%?  Then buys assets at a 10% free cash flow yield.  If yen runs up against the dollar, he has a hedge.  

 

Does anyone have any recollection of Buffett playing these "baskets"? I remember him going into airlines and that's probably the right move and then, COVID happened and he backed out of them.

 

But, I do not recall him playing a sector bet like this and how it turned out.

[nwoodman]

1 hour ago, schin said:

 

Does anyone have any recollection of Buffett playing these "baskets"? I remember him going into airlines and that's probably the right move and then, COVID happened and he backed out of them.

 

But, I do not recall him playing a sector bet like this and how it turned out.

He’s done it with pharmaceuticals in the past

 

”Buffett has said that a basket approach to the pharmaceutical sector makes sense given the difficulty in handicapping drug pipelines”

 

https://www.barrons.com/articles/why-warren-buffetts-berkshire-hathaway-fell-out-of-love-with-jpmorgan-51605629567

Edited July 27, 2023 by nwoodman

[Xerxes]

In regards to the Japanese trading companies, the key statement he had said was that, “they are very similar to Berkshire”

 

I think that says a lot in terms of how he thinks about them. Therefore unlike the previous sectorial bets: U.S. airlines, pharmaceutical or U.S. banking services. 

[crs223]

3 hours ago, Xerxes said:

they are very similar to Berkshire

 

Would Buffett ever buy FFH?

[Xerxes]

3 hours ago, crs223 said:

 

Would Buffett ever buy FFH?

buying as a bolt-up for the float, maybe but it is not for sale. 
 

buying as an non-controlling investment, I doubt it. what cross section of operating non-insurance investment does FFH that Berkshire does not already own.  

[crs223]

Presumably Buffett likes to purchase stock in undervalued businesses.  Buffett knows BRK well and has been buying BRK stock.  I ASSume Buffett understands FFH.

 

I’m wondering aloud why Buffett purchases BRK instead of FFH.  Either 1) Buffett does not purchase businesses similar to BRK 2) Buffett does not understand FFH 3) Buffett does not think FFH is cheap.

 

I had been assuming (1) until a few hour ago when @Xerxes noted that Buffet thinks the Japanese businesses are similar to BRK.

 

Maybe as you suggest it’s 4) FFH has no cross section of operating non-insurance investment that Berkshire does not already own… but i would think if it’s cheap enough WEB would not care about the “cross sections”.  After all, WEB buys BRK…

[Xerxes]

56 minutes ago, crs223 said:

Presumably Buffett likes to purchase stock in undervalued businesses.  Buffett knows BRK well and has been buying BRK stock.  I ASSume Buffett understands FFH.

 

I’m wondering aloud why Buffett purchases BRK instead of FFH.  Either 1) Buffett does not purchase businesses similar to BRK 2) Buffett does not understand FFH 3) Buffett does not think FFH is cheap.

 

I had been assuming (1) until a few hour ago when @Xerxes noted that Buffet thinks the Japanese businesses are similar to BRK.

 

Maybe as you suggest it’s 4) FFH has no cross section of operating non-insurance investment that Berkshire does not already own… but i would think if it’s cheap enough WEB would not care about the “cross sections”.  After all, WEB buys BRK…

a (4) would be a marketable security like investment like Markel, which was perhaps done by the Two Fellows Down the Hall 
 

I found it funny that in various podcast with the Markel chief, the podcast host makes a big deal about BRK investment in Markel. 

[Intelligent_Investor]

16 hours ago, crs223 said:

Presumably Buffett likes to purchase stock in undervalued businesses.  Buffett knows BRK well and has been buying BRK stock.  I ASSume Buffett understands FFH.

 

I’m wondering aloud why Buffett purchases BRK instead of FFH.  Either 1) Buffett does not purchase businesses similar to BRK 2) Buffett does not understand FFH 3) Buffett does not think FFH is cheap.

 

I had been assuming (1) until a few hour ago when @Xerxes noted that Buffet thinks the Japanese businesses are similar to BRK.

 

Maybe as you suggest it’s 4) FFH has no cross section of operating non-insurance investment that Berkshire does not already own… but i would think if it’s cheap enough WEB would not care about the “cross sections”.  After all, WEB buys BRK…

Its because FFH is too damn small for Berkshire. A 10% stake in FFH is less than $2B, even if FFH doubles, that barely even moves the needle given Berkshire's current size

[Xerxes]

1 hour ago, Intelligent_Investor said:

It’s because FFH is too damn small for Berkshire. A 10% stake in FFH is less than $2B, even if FFH doubles, that barely even moves the needle given Berkshire's current size

So is Markel as an investment for Berkshire. 
barely needle-moving. 

[LC]

Perhaps out of respect for Prem? Doesn’t want to be seen stepping on peoples toes, especially at their family controlled company.

[Spooky]

18 hours ago, crs223 said:

I’m wondering aloud why Buffett purchases BRK instead of FFH.  Either 1) Buffett does not purchase businesses similar to BRK 2) Buffett does not understand FFH 3) Buffett does not think FFH is cheap.

 

One other factor to add to the list is the jurisdiction / exchange of the target. Munger has expressed in the past that they much prefer to hold investments on the US exchanges. I don't think they currently own any Canadian listed companies.

[Luke]

7 hours ago, Intelligent_Investor said:

Its because FFH is too damn small for Berkshire. A 10% stake in FFH is less than $2B, even if FFH doubles, that barely even moves the needle given Berkshire's current size

Not only that but the Volume is so little, they would shoot up the share price. To get to 2B it needs many weeks of the total daily volume being bought. 

[Intelligent_Investor]

Yeah the illiquidity would be a problem. I don't think Berkshire minds being most of the volume if there is high liquidity. IIRC Charlie stated that when they were buying Coke, they bought almost all the daily volume for months.

[Xerxes]

https://www.bnnbloomberg.ca/buffett-spurs-japan-activist-pioneer-to-seek-2-billion-for-fund-1.1969537.amp.html

[LC]

Revisiting this - for those who have experience investing in Japan, how do you find ideas? 

Specifically, is there a good screener that you use? Everything I see seems junky and not comprehensive, and I don't shell out for a bb terminal.

[Thelilyinvestor]

2 hours ago, LC said:

Revisiting this - for those who have experience investing in Japan, how do you find ideas? 

Specifically, is there a good screener that you use? Everything I see seems junky and not comprehensive, and I don't shell out for a bb terminal.

 

Best screener for Japan is the Buffett Screener.

 

These trading companies are extremely high quality and pretty much cheap still after the run.

 

[LC]

That's fair - I am looking at a basket approach so looking to incorporate some others as well, including net-nets and other low P/B stuff. 

I came across this post which is spurring my investigation: https://altaycap.substack.com/p/full-cheap-japanese-portfolio-positions

[schin]

On 7/27/2023 at 3:09 AM, nwoodman said:

He’s done it with pharmaceuticals in the past

 

”Buffett has said that a basket approach to the pharmaceutical sector makes sense given the difficulty in handicapping drug pipelines”

 

https://www.barrons.com/articles/why-warren-buffetts-berkshire-hathaway-fell-out-of-love-with-jpmorgan-51605629567

 

Do you know what his return was? I know he was trying to do that with the airlines before COVID blew that up. But, how did he do with his pharma basket?

[nwoodman]

I haven’t followed it closely but I believe the stakes were disclosed in the Q3 2020 13F
 

AbbVie,

Bristol-Myers Squibb

Merck,

Pfizer

He exited Q1 2022.  So hardly buy and hold

 

short article discussing the fact that he brought up in the idea of the pharma basket in the 2000’s
 

https://markets.businessinsider.com/news/stocks/warren-buffett-berkshire-hathaway-buy-4-pharma-stocks-20-years-2020-11-1029815931

 

Exit article

https://www.fiercepharma.com/pharma/buffetts-berkshire-backs-out-three-big-pharma-holdings