Trade Radar | What Does Warren Buffett See In These Japanese Trading Companies?
Another Weekly Session with Loui, M+ Online Head of Research.
The “Oracle of Omaha” first acquired stakes in these firms in August 2020 for his 90th birthday, in an initial purchase worth roughly USD6bn, 5% into each of these firms namely, (i) Mitsubishi Corp., (ii) Mitsui & Co., (iii) Itochu Corp., (iv) Marubeni and (v) Sumitomo.
Acquire further to 7.4%. Two years later, it has acquired another round into these Japanese companies to 7.4% and added that it may consider further acquisitions in the April 2023 interview with CNBC.
Up Stakes to 8.5%. On Monday (19th June), Berkshire Hathaway announced that its wholly-owned subsidiary, National Indemnity Company, has raised its stake in five Japanese trading firms to an average of over 8.5%, as reported by CNBC.
Further add on if BoD approves. Meanwhile, he does not rule out the possibility of raising its stakes in each of the trading houses up to 9.9% if the firms' board of directors approves them and he is willing to hold the investments for 10-20 years.
So, why these Japanese companies?
What are the companies involved in? Japan’s trading houses (a.k.a “sogo shosha),” are conglomerates that trades in a wide range of products and materials. By importing metals, textiles, food, and other goods, these companies have significantly contributed to elevating Japan's economy to a global level.
Steady dividend yields and free cash flow. Although these conglomerates are too complicated for some investors, as well as their increasing exposure to risks abroad due to their international expansion efforts, the diversified operations might be part of the attraction for Warren Buffett. Also, they have high dividend yields and steady free cash flow.
How can you enjoy this ride with Warren Buffett?
Via Japan ETFs. In our previous live stream on the final week of May, we did provide investors with the opportunity to get some exposure via some of the ETFs.
EWJ - iShares MSCI Japan ETF has risen more than 5%.
SCJ - iShares MSCI Japan Small-Cap ETF gained more than 2.5%.
Another acquisition may come in soon? Since Warren Buffett has mentioned that he may add on the stakes to 9.9%, we believe there might be further upside potential in the Japanese market, hence traders could get exposure via the following ETFs.
| ETFs | Name |
| EWJ | iShares MSCI Japan ETF |
| EWJV | iShares MSCI Japan Value ETF |
| SCJ | iShares MSCI Japan Small-Cap ETF |
| JOF | Japan Smaller Capitalization Fund Inc |
| FJP | First Trust Japan AlphaDEX Fund |
| HEWJ | iShares Currency Hedged Msci Japan ETF |
Do own these ETFs with Warren Buffett via M+ Global App.
More about Loui:
Loui Low leads a team of analysts to perform equity and economic research and to provide investment advisory services to the organization's sales team, fund manager and retail fraternity. He has more than 10 years of experience in the stockbroking industry.
He graduated with a Bachelor of Science in Statistics from University of Malaya. He also holds an STA Diploma and is a member of the Society of Technical Analysts (MSTA) United Kingdom.
More about the Trade Radar:
Trade Radar is a weekly-updated section, featuring Loui's latest insights into market trends and hot topics. Traders may find some trading inspiration from Loui's views.
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