Warren Buffett looks for more Japanese stocks amid cheaper valuations
(MENAFN) Warren Buffett may find a new opportunity to increase his stake in his favored Japanese companies due to their currently lower valuations. The recent market crash resulted in a significant loss of about 980 billion yen (USD6.7 billion) in the value of Buffett's shares in these firms by Monday. However, as Japanese Stocks began to recover by Wednesday, the losses narrowed to approximately 550 billion yen. Mineo Peto, CEO of Peto Financial Services and a long-time attendee of Berkshire Hathaway's shareholder meetings, noted that buying additional shares at these reduced prices could be advantageous for Buffett.
Berkshire Hathaway, Buffett's investment conglomerate, holds an average ownership of 8.2 percent in each of five major Japanese trading companies: Marubeni Corp., Itochu Corp., Sumitomo Corp., Mitsui & Co., and Mitsubishi Corp. These holdings reflect Buffett's strategic interest in these firms. The recent market turmoil saw the shares of Marubeni and Mitsui & Co. decline the most, dropping by 31 percent, as concerns over a strong yen potentially reducing overseas revenues triggered sharp sell-offs in trading company stocks.
Despite the downturn, this scenario might present Buffett with a buying opportunity similar to last year. The price-to-earnings (P/E) ratios of Marubeni and Mitsui & Co. fell to approximately 7.5 and 9.1, respectively, by Wednesday. These levels are comparable to those seen during the April-June period of the previous year, a time when Buffett increased his investments in these companies. The P/E ratio, a crucial financial metric for evaluating stock prices, is calculated by dividing a company's stock price by its earnings per share over a specific period, typically the last fiscal year. This metric indicates that the current lower P/E ratios might signal undervalued stocks, potentially prompting Buffett to enhance his holdings.
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