Is Masayoshi Son the next Warren Buffett?

A note from Sanford C. Bernstein & Co. argues that Son’s SoftBank Group Corp. is the next Berkshire Hathaway Inc.

“We like to think of SoftBank as a tech-focused Berkshire Hathaway,” analyst Chris Lane wrote, noting that investor returns have been similarly strong. In fact, Lane finds a lot that the Japanese and U.S. firms have in common.

For starters, both are hard to define, Lane writes. SoftBank uses cash from its core telecommunications operations to invest in companies positioning to be part of the future — like e-commerce, microprocessor designs and robotics. And there’s not much synergy between many of its units, Lane notes. Sound familiar? Berkshire leverages the cash from its insurance firm to invest into other businesses. Buffett’s company started out in the textile milling industry, but what does that have to do with NetJets Inc. or Coca-Cola Co., two of Berkshire’s most notable investments.

“The core business is ‘value investing,’ not insurance,” Lane wrote. “SoftBank’s core business is ‘tech investing.”‘

Here’s where the two start to diverge: Son is beating Buffett at his own game, Lane says. Going back 10 years, investing in Berkshire would have netted returns of more than 120 percent. In that same time frame, an investment in SoftBank would have gotten you more than 300 percent.

That track record extends to comparing the stocks to their respective benchmarks. Lane points out that from 2001 until now, Berkshire has outperformed the Dow Jones Industrial Average by 175 percent, while SoftBank has outperformed the Nikkei by 540 percent.

But when it comes to popular investment measures like price-to-earnings ratio, SoftBank is still trading at a big discount to Berkshire. Lane says that is because investors have a sense of trust in Buffett and his track record, while Son still has to prove himself, since so many of the bets are in the private market.

“So why don’t we hear about the sage of Tosu (Son’s hometown in Saga Prefecture) or Tokyo (where he lives)? Whereas investors trust Buffett’s instincts and understand his value investing approach, they fear Masa’s big bets on the future,” he concluded.

Those big bets also offer potential for the biggest upside over the next 10 years, Lane said. Through its $100 billion vision fund, which counts technology giants like Apple Inc. as investors, SoftBank has invested in private companies including Slack Technologies Inc. and WeWork Cos., and is finalizing plans to invest in Uber Technologies Inc.

Lane himself seems to have a great deal of trust in Son, since he has placed a target price of ¥13,500 on shares, a rise of 35 percent from today’s levels.

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