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Investors beware: why they recommend not following Warren Buffett’s bet on Japanese companies

Investors beware: why they recommend not following Warren Buffett’s bet on Japanese companies
February 19, 2024 – 18:30

Buffett is known as a value investor. His company tends to focus on a small number of carefully selected stocks and hold them for a long time. However, is it worth investing in them at this time?

In April 2023, Warren Buffett increased its stake in five Japanese companies and caused shares to soar on the Tokyo Stock Exchange. Is about Itochu Corp, Mitsubishi Corp, Mitsui & Co, Sumitomo Corp and Marubeni Corp up to 5%.

Warren Buffett assured in an interview with the Japanese newspaper Nikkei that he intends to once again increase his investments in these Japanese stocks, since he was “very proud” of his participations in the main commercial groups of the country.

Buffett is known as a value investor. His company tends to focus on a small number of carefully selected stocks and hold them for a long time. However, is it worth investing in them at this time?

Warren Buffett’s bet on Japanese stocks: why it is advisable not to invest

According to Roula Khalaf, eThe editor of the Financial Times, when Warren decided to buy these papers, they were at a “discount” price. This year, as Japan’s stock market approaches an all-time high, it was Buffett who benefited the most.

But it stands out that those five companies at that time were around a quarter below their respective liquidated values. “Today, the same group is approximately 25% above book value. Unless there is high earnings growth that lifts the underlying book value, any hopeful arbitrage opportunity has disappeared,” Khalaf explained.

As explained by analysts, only Itochu offers a positive earnings per share growth until 2027 and recommended: “Investors turning to sogo shosha now would be better off with a Japanese index fund”.

Source: Ambito

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