Warren Buffett’s buying of Japanese trading firms helped propel the nation’s stocks to multidecade highs. Six months on, insurers and banks are emerging as the next potential value targets.
Insurers have low price-to-book ratios, strong fundamentals and relatively high returns, said Masakazu Takeda, who manages the $294 million Hennessy Japan Fund for Sparx Asia Investment Advisors in Hong Kong. Major banks are also prospects on the likelihood of tighter monetary policy, said analysts at Mizuho Securities and Mitsubishi UFJ Morgan Stanley Securities.
An endorsement from the billionaire goes a long way. The five trading firms that Buffett favored — Mitsubishi Corp., Mitsui & Co., Sumitomo Corp., Marubeni and Itochu — are up more than 20% since a report in April said he raised holdings in the sector and was looking to increase exposure to Japanese stocks. Gains were even greater three weeks ago, before the market flirted with a correction amid higher bond yields and a small recovery in the yen.