(Bloomberg) — Market watchers say Warren Buffett may want to buy Japanese financial firms and shipping companies, following the return of Berkshire Hathaway Inc. to the yen bond markets is fueling speculation that he is raising money to build stakes in value stocks.
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The billionaire’s company this week instructed banks to manage the sale of yen bonds on the global market, in a sign he could increase his positions in Japan. Most of his previous investments in Japanese stocks were financed with yen bonds, Buffett said in his February annual letter.
Eiji Kinouchi, chief technical analyst at Daiwa Securities Co., sees opportunities for insurers and shippers as Buffett’s next picks. Although trading firms rose on news of bond sales, 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 biggest gainers in the Topix since August and may fit Buffett’s value investing strategy, he said.
“If it’s not a trading company, it will have a big impact on the entire market,” Kinouchi said.
The renewed presence of Buffett, known as the Oracle of Omaha, could lift Japanese stocks as his support for the big five trading houses helped push the Nikkei 225 Stock Average to a record high earlier this year. Should Berkshire’s pick expand into other sectors, it will be a supportive factor for a market that has seen intense volatility in recent months due to political uncertainty and currency fluctuations.
Berkshire did not immediately respond to a request for comment outside of regular U.S. hours.
Valuations of Japanese banks and insurance companies have fallen after a massive sell-off in the broader market in August. Estimated price-to-earnings ratios for the Topix insurance and banking indices are 9 and 10.1 respectively, up from 12.1 and 12.4 in early July, when the broader gauge hit a record high.
Takashi Ito, senior strategist at Nomura Securities Co., also said there is a strong possibility that Buffett will buy financial stocks. “The fundamentals in the Japanese financial sector are strong, which is in line with Buffett’s standards,” he said.
A stock screen by Nomura’s strategists, including Tomochika Kitaoka, showed that Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Trust Group Inc. and Sompo Holdings Inc. are among the financial companies that match the characteristics of Berkshire’s portfolio.
The Bank of Japan’s policy shift 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 imagine him buying Japanese banking stocks while selling that sector in the U.S., a market he understands well,” said Mineo Bito, president and CEO of Bito Financial Service Co., a frequent Berkshire shareholder . meetings in Omaha, Nebraska.
–With help from Yasutaka Tamura.
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