The Japanese economy and stock market alike have crumbled as a result of the earthquake, tsunami and ongoing nuclear power plant trouble. There is a great humanitarian crisis; unfortunately sometimes these crises bring about buying opportunities. Investing in Japan also would help the economy recover as there are more capital inflows.
Sometimes out of despair and grief comes triumph and ingenuity. While Japan continues to pick up the pieces and get itself back on its own two feet, we can only wish them the best of luck and a quick recovery. Some have even speculated that as Japan begins on a massive rebuilding campaign, it might help the country recover from the economic stagnation that the country has been experiencing for over 20 years.
From an investment point of view, however, this is the perfect opportunity for many value and long-term investors to jump into the market at some Japanese companies. Warren Buffett stated several weeks ago, "It will take some time to rebuild, but it will not change the economic future of Japan," and, "If I owned Japanese stocks, I would certainly not be selling them.”
Additionally, Buffett stated, "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."
One great way to look at Japan right now is to remember what Warren Buffet would be doing (or perhaps is doing right now, if he is not too distracted by the David Sokol fiasco).
Buffett will look for large companies that possess strong moats and barriers to entry. These companies should have high returns on equity, strong pricing power and also good management, as well as some additional characteristics. No one knows Buffett’s exact formula, but one can get a sense from his statements and past buys what he might be looking at.
I would not recommend investing in Japan to people unfamiliar with the culture. It is very important to understand a country’s culture before investing there. In Japan, companies will many times buy stock in lieu of payment to a vendor. In addition, in Japan it is highly frowned upon for companies to liquidate, as it is deemed a failure. However, buying a basket of stocks might not be a bad idea.
However, I looked at some stocks that Buffet might be looking at.
Just by looking over some headlines I was able to see some companies across different makeups that could make sense.
The first such company would have to be Bridgestone (BRDCY.PK). While they are known for their tires, they have also dabbled just slightly in golf balls and electronic paper as well. Still, they could be considered a solid yet boring company (the very kind that you could expect to see Buffet get into). Over their recent history, there has been some fluctuation as a result of their inputs of commodities and also their product demand (tires during the auto crisis) being relatively unstable. The company’s PE according to Bloomberg is ~13. Again, a Buffett investment hallmark.
Another company that comes to mind would have to be the Nippon Telegraph and Telephone Company (NTT, Financial). They are one of the world’s largest telecommunications providers, and specialize as a provider of phone services as well as multimedia, internet services and other IT related services across the world. They aren’t exactly a high-tech or edgy company, but they also aren’t the traditional “boring” type that Buffet has been known to target. However, they were a fairly strong looking company before the earthquake hit Japan, and the price had dropped almost 12% in a week following the earthquake. However, they were trading as of March 3 at ~$22.50 per share; the company has a PE of 9 and EBITDA (I know Buffett does not like EBITDA) margins of 32%. This is not a company he could buy outright as the market cap is too large, but he could but a large stake in Nippon Telegraph and Telephone.
As Buffett’s cash pile keeps building, he is very limited in what companies he can buy in the United States, as there are only a few companies that would match his criteria for a large investment. His circle of competence is also increasing as he now seems comfortable investing in many countries; Munich Re in Germany, Iscar in Israel, BYD in China, and Posco in South Korea as just some examples. It would not be surprising if the next “elephant” is in Japan.
Disclosure: I am long JOF a Japanese close ended fund. No positions in any companies mentioned.
http://www.valuewalk.com
Also check out:
Sometimes out of despair and grief comes triumph and ingenuity. While Japan continues to pick up the pieces and get itself back on its own two feet, we can only wish them the best of luck and a quick recovery. Some have even speculated that as Japan begins on a massive rebuilding campaign, it might help the country recover from the economic stagnation that the country has been experiencing for over 20 years.
From an investment point of view, however, this is the perfect opportunity for many value and long-term investors to jump into the market at some Japanese companies. Warren Buffett stated several weeks ago, "It will take some time to rebuild, but it will not change the economic future of Japan," and, "If I owned Japanese stocks, I would certainly not be selling them.”
Additionally, Buffett stated, "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."
One great way to look at Japan right now is to remember what Warren Buffet would be doing (or perhaps is doing right now, if he is not too distracted by the David Sokol fiasco).
Buffett will look for large companies that possess strong moats and barriers to entry. These companies should have high returns on equity, strong pricing power and also good management, as well as some additional characteristics. No one knows Buffett’s exact formula, but one can get a sense from his statements and past buys what he might be looking at.
I would not recommend investing in Japan to people unfamiliar with the culture. It is very important to understand a country’s culture before investing there. In Japan, companies will many times buy stock in lieu of payment to a vendor. In addition, in Japan it is highly frowned upon for companies to liquidate, as it is deemed a failure. However, buying a basket of stocks might not be a bad idea.
However, I looked at some stocks that Buffet might be looking at.
Just by looking over some headlines I was able to see some companies across different makeups that could make sense.
The first such company would have to be Bridgestone (BRDCY.PK). While they are known for their tires, they have also dabbled just slightly in golf balls and electronic paper as well. Still, they could be considered a solid yet boring company (the very kind that you could expect to see Buffet get into). Over their recent history, there has been some fluctuation as a result of their inputs of commodities and also their product demand (tires during the auto crisis) being relatively unstable. The company’s PE according to Bloomberg is ~13. Again, a Buffett investment hallmark.
Another company that comes to mind would have to be the Nippon Telegraph and Telephone Company (NTT, Financial). They are one of the world’s largest telecommunications providers, and specialize as a provider of phone services as well as multimedia, internet services and other IT related services across the world. They aren’t exactly a high-tech or edgy company, but they also aren’t the traditional “boring” type that Buffet has been known to target. However, they were a fairly strong looking company before the earthquake hit Japan, and the price had dropped almost 12% in a week following the earthquake. However, they were trading as of March 3 at ~$22.50 per share; the company has a PE of 9 and EBITDA (I know Buffett does not like EBITDA) margins of 32%. This is not a company he could buy outright as the market cap is too large, but he could but a large stake in Nippon Telegraph and Telephone.
As Buffett’s cash pile keeps building, he is very limited in what companies he can buy in the United States, as there are only a few companies that would match his criteria for a large investment. His circle of competence is also increasing as he now seems comfortable investing in many countries; Munich Re in Germany, Iscar in Israel, BYD in China, and Posco in South Korea as just some examples. It would not be surprising if the next “elephant” is in Japan.
Disclosure: I am long JOF a Japanese close ended fund. No positions in any companies mentioned.
http://www.valuewalk.com
Also check out:
