Buffett's investments in Japan

[Thelilyinvestor]

12 hours ago, LC said:

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

Of course my answer was partially a joke.

 

I think the main idea with Japanese stocks is finding the few ones who understand capital allocation, even if they are a bit more expensive than the ultra cheap stuff.

[jbwent63]

My tracking shows the portfolio crossed 3 TRILLION yen overnight. $20.3 Billion USD. Wow.

[gfp]

40 minutes ago, jbwent63 said:

My tracking shows the portfolio crossed 3 TRILLION yen overnight. $20.3 Billion USD. Wow.

 

And currency hedged + funded by short yen bonds..  brilliant

[Xerxes]

https://podcasts.apple.com/ca/podcast/focused-compounding/id1352422076?i=1000627504489

 

Edited September 28, 2023 by Xerxes

[no_free_lunch]

On 9/15/2023 at 12:28 AM, Thelilyinvestor said:

Of course my answer was partially a joke.

 

I think the main idea with Japanese stocks is finding the few ones who understand capital allocation, even if they are a bit more expensive than the ultra cheap stuff.

Who is the Warren Buffet / Prem Watsa of Japan?

[Thelilyinvestor]

3 hours ago, no_free_lunch said:

Who is the Warren Buffet / Prem Watsa of Japan?

 

Well, track record wise, you have to say Masayoshi Son, from Softbank. But I consider this guy a smart guy who has both been extremely aggressive and probably lucky.

 

I do not know any Buffett like investors from Japan. Must be some building amazing conglomerates.

[schin]

On 9/29/2023 at 2:57 AM, Thelilyinvestor said:

 

Well, track record wise, you have to say Masayoshi Son, from Softbank. But I consider this guy a smart guy who has both been extremely aggressive and probably lucky.

 

I do not know any Buffett like investors from Japan. Must be some building amazing conglomerates.

 

Masayoshi Son is closer to the Elon Musk than Warren Buffett. Masayoshi is more of a growth investing/venture capitalist than value investing.  He won't take anything out of the trash heap... he is backing horses.... I would says he's more Elon Musk in IQ and Andresson Horawitz/Sequoia Capital-esque.

[Thelilyinvestor]

5 hours ago, schin said:

 

Masayoshi Son is closer to the Elon Musk than Warren Buffett. Masayoshi is more of a growth investing/venture capitalist than value investing.  He won't take anything out of the trash heap... he is backing horses.... I would says he's more Elon Musk in IQ and Andresson Horawitz/Sequoia Capital-esque.

 

Completely Agree. 

 

We will find a great capital allocator, will post here if I find someone that walks the talk.

[gfp]

good article on the Sogo Shosha from nikkei  h/t "BreckHutHigh"

https://asia.nikkei.com/Opinion/Warren-Buffett-is-right-to-be-proud-of-Japan-s-trading-companies

[UK]

https://www.bloomberg.com/news/articles/2023-10-10/buffett-acolytes-see-financial-stocks-as-his-next-japan-play#xj4y7vzkg

 

“If wage increases become clearer at the beginning of next year, and if interest rates in Japan are sure to rise, Buffett may buy in early next year,” said Masatoshi Kikuchi, the chief equity strategist at Mizuho Securities. “I think there is still potential for major bank stocks.”

 

[nwoodman]

MS put out a note on Japanese prospects (attached) which may be of interest to some here.  They offer the following:

 

“Sustained reflation and rising productivity at the macro level - working in combination with improved corporate governance at the micro level - will likely drive further improvement in corporate profitability in Japan. We raise our forecast for MSCI Japan Return on Equity to 12% (from 11%) by year-end 2025. This would be almost 2.5x the level when Abenomics was launched in late 2012. In turn, that will likely drive further valuation re-rating from 14x P/B to 1.8x and market outperformance versus global equity peers.”

 

japan_20231017_2000.pdf

[Spooky]

This chart has me wondering what is going on in Brazil...

[rogermunibond]

A good write up on Japanese trading companies from Daye Deng at Valuepunks.  Part 1 is free and Part 2 requires Substack subscription.

 

https://valuepunks.substack.com/p/deep-dive-japanese-trading-companies

[DooDiligence]

4 hours ago, Spooky said:

This chart has me wondering what is going on in Brazil...

 

palavra!

 

Here's an interesting historical perspective.

 

Japan’s Investment Success in Brazil: Economic Savvy or Rooted in History?

 

"In the last few years, Japanese involvement in Brazil has taken a business turn. Beermaker Kirin’s recent takeover of Brazilian brewing company Schincariol exemplifies Japan’s commercial capability and influence in Brazil. Kirin spent $2.6 billion to become the majority shareholder of Schincariol, which brought in $1.8 billion in revenue in 2010. It is Brazil’s second-largest beer producer, behind AmBev, which became the world’s largest brewer when it merged with Anheuser-Busch in 2008. With a strong yen for funding acquisitions and a shrinking Japanese beer market, Kirin is doing exactly the same as many other foreign companies: partnering, doing business, and investing in emerging markets, including Brazil’s."

 

and then,

 

Kirin bowing out of Brazil beer market

 

I just took some funds that are earmarked for deck and dock improvements and bought a little AmBev.

I'm hoping to sell the shares next year and use a little better materials for my backyard project.

This is the 3rd time I've owned ABEV and am prepared to hold longer if I have to.

Octoberfest in Blumenau.

Carnival is coming up.

Beer, opa!

[ValueArb]

 

https://www.bloomberg.com/news/articles/2023-10-17/top-japan-fund-bets-english-disclosure-to-lift-small-cap-shares?srnd=null

 

A top-performing Japanese small-cap fund is betting that pressure on companies to provide financial information in English will help spur demand for shares that foreign investors tend to avoid.

 

Gesiuris Asset Management’s Marc Garrigasait, who manages the Japan Deep Value Fund FI from Barcelona, got a head start by side stepping domestic brokers for information and spending months studying translated material to help find undervalued firms with liquid assets. This year it’s enabled his fund to beat 97% of its peers, according to Bloomberg data.

“When we analyzed all these annual reports translated to English, that’s the moment that we said, ‘wow, this is incredible, we will launch a fund,’” said Garrigasait, who started Japan Deep Value in 2016. 

 

An improvement in transparency may help revive foreign demand that drove Japan’s stock market to multi-decade highs earlier this year, partly thanks to improvements in governance. While many foreign funds remain bullish over the long run, they have taken profit in recent weeks as the blue-chip Nikkei 225 Stock Average slid on concerns over the risk of higher US interest rates and an economic slowdown in China. 

 

Garrigasait’s currency-hedged fund has climbed 22% this year, more than double the Topix’s return in euro terms. He focuses on firms with ample free cash flow, little debt and a traditional business model that is easy for investors outside of Japan to follow.

His $37 million fund has its biggest stake in Shinnihon Corp., a construction company that’s up almost 60% this year and has foreign ownership of less than 20%, according to data compiled by Bloomberg.

 

... Tokyo’s bourse operator said last week that it discussed mandating firms that are popular with overseas investors to provide English-language material. Less than half of the firms with a market cap lower than ¥25 billion ($167 million) offer investor relations presentations in English, compared with more than 80% for firms with a size of at least ¥100 billion, according to TSE figures. 

[schin]

Charlie talked about this Japanese trade in this podcast.

Andrew: There's been a lot of discussion about Berkshire's investments in the Japanese trading houses.

Charlie: That is a no-brainer. Something like that, if you're as smart as Warren Buffett, maybe two to three times the century, you had an idea like that. The interest rates in Japan were half a percent per year for 10 years. These trading companies were really entrenched old companies. They had all these cheap copper mines and rubber plantations.

You could borrow for ten years ahead. Probably about a year you could buy the stocks and it's likely at 5% dividends. A huge flow of cash with no investment, no thought, no anything. How often do you do that? You'll be lucky if you get one or two a century. We could do that, nobody else could.

It looked attractive for half a percent, but you couldn't get it. But Berkshire with its credit could, and the only way you could get it was be very patient, just pick away little pieces of the time. It took him forever to get $10 billion invested. It was like God just opening a chest and just pouring money. It's awfully easy money.

Ben: It's interesting that it's paradoxical. You need Berkshire's credit. But at Berkshire scale, it's actually hard to put enough money to work.

Charlie: That's true, but why shouldn’t it be hard to make money? Why should it be easy?

David: Japanese trading companies remind me. We studied another company recently, Nike. That is surprising to me. Have you ever looked at it?

Charlie: That's a very different company. That's a style company. Of course, I've looked at it, but I don't like style companies.

Ben: Too fad-driven?

 

 

 

 

Edited November 2, 2023 by schin
Added quote

[Stuart D]

On 10/18/2023 at 10:18 PM, Spooky said:

This chart has me wondering what is going on in Brazil...

Well the central bank has interest rates at 12.25%, so I’m assuming that’s keeping a lid on equity valuations.

 

And on the ROE side Peteobras is something like 12% of the index & they’ve been doing well recently.
 

There’s probably a bunch of other commodity names in there (Vale perhaps?) that would likely have done well over the past couple of years too.

Edited November 2, 2023 by Stuart D

[gfp]

No surprise, but the CEO of Sumitomo commented to Barron's on Berkshire continuing to buy all 5 trading houses -

 

"

...

At the time, Berkshire Hathaway said it may increase its holdings depending on price, but that Buffett had pledged that it would not purchase more than 9.9% of any of the five companies before seeking approval from the respective boards.

That time may soon be coming, according to Masayuki Hyodo, the CEO of Sumitomo Corporation, one of the five general trading companies in which Berkshire has invested. Those investments represent its only public holdings in Japan.

 

“Through the information I have, it is increasing—not only Sumitomo, but all five trading companies. His share is increasing every day,” Hyodo told Barron’s in an interview on the sidelines of the World Economic Forum late Monday.

Barron’s has asked Berkshire Hathaway for comment.

Berkshire sold 122 billion yen ($837 million) worth of yen-denominated bonds in November, an offering that sparked speculation that Buffett may be raising cash to increase investments in Japan."

 

https://www.barrons.com/articles/warren-buffett-berkshire-hathaway-japan-sumitomo-davos-9d9310a3

[John Hjorth]

Much in line with the last post by @gfp above :

 

Bloomberg - Markets [January 17^th 2024] : Sumitomo Clarifies Buffett Comments After Trading House Stocks Jump .

Edited January 20 by John Hjorth

[nwoodman]

1 hour ago, John Hjorth said:

Much in line with the last post by @gfp above :

 

Bloomberg - Markets [January 17^th 2024] : Sumitomo Clarifies Buffett Comments After Trading House Stocks Jump .

and they kept going up

[John Hjorth]

4 hours ago, nwoodman said:

and they kept going up

 

 

Well, @nwoodman,

 

-So he is averaging up, also think about what he has not only said, but actually written about allocating capital to your 5^th or 10^th best ideas in the 1993 Letter, now using basket approach of 5, and now also implementing leverage 

 

[J/K, actually! - It all relative ..., among other things to who you are and what you are working / operating with! - Situational flexibility!]

[competitive-advantage]

22 hours ago, John Hjorth said:

-So he is averaging up, also think about what he has not only said, but actually written about allocating capital to your 5^th or 10^th best ideas in the 1993 Letter, now using basket approach of 5, and now also implementing leverage 

 

I agree John. Munger also talked about doing this in pharma because it's a smart move if Berkshire don't know what's the best investment.

[Whensthepaintdry?]

Maybe they are all good investments, but just not big or liquid enough. 

[Xerxes]

Last year in the letter, Buffett removed the usual table with top ten positions. It was presumed (after the Tokyo trip) reason being to hide the increasing ownership of the 5 Japanese companies. Not sure if that assumption had any merit, unless he was going to basket them as one line item. Or maybe one of them was showing up as the 10th largest holding and he didn’t want to show just one. 
 

in any case, I would love to see the table back in this year’ letter. And for him to put the Japanese investment in context with the rest.
 

Yes, one can do that on its own. But prefer to see it from the master. 

[gfp]

4 minutes ago, Xerxes said:

Last year in the letter, Buffett removed the usual table with top ten positions. It was presumed (after the Tokyo trip) reason being to hide the increasing ownership of the 5 Japanese companies. Not sure if that assumption had any merit, unless he was going to basket them as one line item. Or maybe one of them was showing up as the 10th largest holding and he didn’t want to show just one. 
 

in any case, I would love to see the table back in this year’ letter. And for him to put the Japanese investment in context with the rest.
 

Yes, one can do that on its own. But prefer to see it from the master. 

 

Three of them were already appearing the year before when he did include the top 15 table -