I don’t know about you but when I saw the Japanese stock market down 14% at one point on one single trading day last week (after falling 5% the day prior) I started to think that just maybe the selling was a bit overdone. Especially since the Japanese market didn’t seem terribly expensive prior to these events.
If you follow the financial news at all I’m sure that you noticed that Warren Buffett is currently in South Korea. And whenever Buffett travels the local press comes out to hear his wise words. With Japan in the news Buffett was asked to speak on the country and how the events impact his investment thinking.
Warren’s exact words as reported by MSNBC were “Frequently, something out of the blue like this, an extraordinary event, really creates a buying opportunity. I have seen that happen in the United States, I have seen that happen around the world. I don't think Japan will be an exception”
What more could we ask for ? Confirmation from Buffett that we have in front of us a buying opportunity. The last time he spoke about a buying opportunity was October 2008, and while he didn’t pick the exact bottom of the stock market crash he was only a couple of months off. And we all remember his comments in 1974 when he was buying stocks hand over fist at another historical market low. My point is, when the man says it is a buying opportunity you load up the truck.
The problem I have is that I don’t know enough about any Japanese company to be buying shares. I’m not one to invest in something I’m not familiar with, and rushing to learn Japanese companies seems like a sure way to make an investing mistake.
So the best move in my mind is to turn to a professional investor with an excellent long term record who was familiar with Japan before this selloff and can quickly capitalize on it. And the first investment fund on my list was Longleaf Partners who manage the Longleaf Partners – International Fund.
At December 31, 2010 Longleaf International Fund had the following investment weighting by country:
The fund was already heavily weighted towards Japan so you will likely be buying their current Japanese investments at a discounted price to what Longleaf acquired them. And perhaps more importantly you are also going to be benefitting from a manager who has already studied the Japanese market and knows which companies to buy now that they are seriously on sale.
I would suspect that this 21% weighting towards Japan could well be growing this week as Longleaf shifts investments from markets that haven’t sold off and into Japan to take advantage of bargains.
At the end of December 2010 the top specific holdings in the fund were:
You can see that Longleaf runs a pretty concentrated fund with 62% of the fund in their top ten ideas. This concentrated value approach is likely a big reason why the various Longleaf Partners funds have outperformed their various indices for their entire history.
Longleaf describes their investing philosophy as follows:
“Longleaf Partners International Fund seeks long-term capital growth by investing primarily in a limited number of international or foreign companies of all sizes believed to be significantly undervalued. We are value investors. The Funds seek to achieve superior long-term performance by acquiring equity securities of financially strong, well-managed companies run by capable managements at market prices significantly below our assessment of their business value. We sell stocks when they approach our appraisal. We view equity investments as ownership in a business enterprise.
We determine business or intrinsic value through financial analysis and established disciplines which we have consistently applied over three decades. Equities purchased at prices substantially less than their intrinsic worth protect capital from significant permanent loss of capital, and also appreciate substantially once the market recognizes the company's economic value. “
With Warren giving me the thumbs up to buy Japan I’m much more comfortable doing it through an experienced successful investment team like Longleaf. They adhere to a Buffett style value investing approach and I trust that they will make good low risk decisions on my behalf.
Also check out:
If you follow the financial news at all I’m sure that you noticed that Warren Buffett is currently in South Korea. And whenever Buffett travels the local press comes out to hear his wise words. With Japan in the news Buffett was asked to speak on the country and how the events impact his investment thinking.
Warren’s exact words as reported by MSNBC were “Frequently, something out of the blue like this, an extraordinary event, really creates a buying opportunity. I have seen that happen in the United States, I have seen that happen around the world. I don't think Japan will be an exception”
What more could we ask for ? Confirmation from Buffett that we have in front of us a buying opportunity. The last time he spoke about a buying opportunity was October 2008, and while he didn’t pick the exact bottom of the stock market crash he was only a couple of months off. And we all remember his comments in 1974 when he was buying stocks hand over fist at another historical market low. My point is, when the man says it is a buying opportunity you load up the truck.
The problem I have is that I don’t know enough about any Japanese company to be buying shares. I’m not one to invest in something I’m not familiar with, and rushing to learn Japanese companies seems like a sure way to make an investing mistake.
So the best move in my mind is to turn to a professional investor with an excellent long term record who was familiar with Japan before this selloff and can quickly capitalize on it. And the first investment fund on my list was Longleaf Partners who manage the Longleaf Partners – International Fund.
At December 31, 2010 Longleaf International Fund had the following investment weighting by country:
As of 12/31/10 | |
Japan | 21.1% |
France | 14.0% |
United States | 9.4% |
Canada | 8.9% |
Ireland | 8.1% |
Spain | 8.0% |
Brazil | 7.2% |
United Kingdom | 6.2% |
Germany | 5.6% |
Hong Kong | 5.2% |
Mexico | 5.0% |
China | 1.3% |
Total | 100% |
The fund was already heavily weighted towards Japan so you will likely be buying their current Japanese investments at a discounted price to what Longleaf acquired them. And perhaps more importantly you are also going to be benefitting from a manager who has already studied the Japanese market and knows which companies to buy now that they are seriously on sale.
I would suspect that this 21% weighting towards Japan could well be growing this week as Longleaf shifts investments from markets that haven’t sold off and into Japan to take advantage of bargains.
At the end of December 2010 the top specific holdings in the fund were:
As of 12/31/10 | ||
NKSJ Holdings | Japanese non-life insurance | 10.7% |
Fairfax Financial Holdings | property/casualty insurance | 8.3% |
ACS Actividades | construction, infrastructure, & energy | 7.5% |
HRT | oil & gas explorer & producer | 6.6% |
Accor | corporate services & hotels | 5.4% |
Hochtief AG | global infrastructure construction | 5.2% |
Cheung Kong | ports, real estate, & telecom | 4.9% |
Yum! Brands | franchisor/owner- Taco Bell, KFC, Pizza Hut | 4.7% |
Cemex | cement company | 4.7% |
Olympus | medical imaging & cameras | 4.4% |
Total | 62.4% |
You can see that Longleaf runs a pretty concentrated fund with 62% of the fund in their top ten ideas. This concentrated value approach is likely a big reason why the various Longleaf Partners funds have outperformed their various indices for their entire history.
Longleaf describes their investing philosophy as follows:
“Longleaf Partners International Fund seeks long-term capital growth by investing primarily in a limited number of international or foreign companies of all sizes believed to be significantly undervalued. We are value investors. The Funds seek to achieve superior long-term performance by acquiring equity securities of financially strong, well-managed companies run by capable managements at market prices significantly below our assessment of their business value. We sell stocks when they approach our appraisal. We view equity investments as ownership in a business enterprise.
We determine business or intrinsic value through financial analysis and established disciplines which we have consistently applied over three decades. Equities purchased at prices substantially less than their intrinsic worth protect capital from significant permanent loss of capital, and also appreciate substantially once the market recognizes the company's economic value. “
With Warren giving me the thumbs up to buy Japan I’m much more comfortable doing it through an experienced successful investment team like Longleaf. They adhere to a Buffett style value investing approach and I trust that they will make good low risk decisions on my behalf.
Also check out:
