(Bloomberg) — Warren Buffett, with more than $146 billion of cash on hand, has been struggling to find attractively priced assets at home in the U.S. Now, he’s looking abroad.
The announcement late Sunday by Buffett’s Berkshire Hathaway Inc. that it bought stakes in five of Japan’s biggest trading companies marks one of his largest-ever forays into Asia’s second-largest economy. The wagers show that Berkshire’s chief executive officer, who turned 90 over the weekend, is willing to expand the company’s horizons in his search for ways to supercharge the Omaha, Nebraska-based conglomerate’s growth.
“I think this is a definite signal that Berkshire is more likely to examine and pursue potential investments internationally,” David Kass, a professor of finance at the University of Maryland’s Robert H. Smith School of Business, said. “This could be the beginning of the tip of an iceberg. There could be many more investments such as this.”
The investments into commodity-centric Japanese conglomerates known as “sogo shosha,” disclosed in a statement from Berkshire, underscore Buffett’s willingness to bet on economically sensitive companies despite the pandemic. The five Japanese companies also have interests in businesses ranging from home-shopping networks to convenience-store chains, offering Berkshire exposure to a wide swath of the Japanese economy.
Read more: Buffett’s Bet Paves Way for Japan as a Global Value Trade
Berkshire said it acquired stakes of about 5% in Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. over the past 12 months. Shares of all five companies jumped at least 4% in Tokyo trading on Monday and Japan’s benchmark Topix index rose as much as 1.9%.
Buffett has been seeking ways to deploy his record cash pile into higher-returning assets to fuel the growth at Berkshire that’s made him famous. But he’s been stifled by high valuations for acquisitions in recent years.
Berkshire Hathaway has continued to rake in funds faster than Buffett can deploy them, a high-class problem that’s been a drag on the stock price. The conglomerate’s shares underperformed the S&P 500 index over the past decade.
While the bets are valued at more than $6 billion, they represent just a sliver, about 4%, of Berkshire’s total cash pile. But the wagers underscore that Buffett sees value in Japanese stocks, according to Kass. Berkshire’s investment comes as global investors have pulled $43 billion from Japanese stocks this year in favor of high-flying U.S. technology shares and other companies viewed as more resilient to economic turmoil.
The investments also give Berkshire more exposure to commodities. Berkshire Hathaway has recently been adding to that bet with deals including a $4 billion agreement to purchase most of Dominion Energy Inc.’s natural gas pipeline and storage assets in July.
Valuations in the sector have cheapened relative to the broader stock market in recent years, weighed down by falling commodities prices and investors’ preference for growth stocks like Amazon.com Inc. Most of the Japanese companies targeted by Berkshire trade at less than book value and offer higher dividend yields than the Topix.
“These trading companies generate strong cash flow, they pay out a lot of dividends and they have businesses that can’t be easily replicated,” said Thanh Ha Pham, an analyst at Jefferies Japan Ltd.
That high barrier to entry is key to Buffett’s investing philosophy. He’s long favored companies that have moats, or some superiority to competitors that makes it hard for others to gain traction. Sumitomo, in describing the business model for the sogo shosha, said it’s a business that’s hard to build overnight, making it challenging for new entrants.
Buffett’s wager could help bolster sentiment toward both commodity plays and Japan. The $5 trillion economy is not only grappling with a persistent coronavirus outbreak and the postponement of the Tokyo Olympics, it’s also going through a leadership transition after Prime Minister Shinzo Abe announced his resignation for health reasons last week. Before its rally on Monday, the Topix had dropped for three straight days and underperformed regional peers in 2020.
“I am delighted to have Berkshire Hathaway participate in the future of Japan,” Buffett said in the statement. “The five major trading companies have many joint ventures throughout the world and are likely to have more of these partnerships. I hope that in the future there may be opportunities of mutual benefit.”
Buffett visited Japan after its 2011 tsunami and nuclear disaster, but he has stayed mostly quiet on investments in the country until now. Speculation that he might be eyeing Japanese stocks has been swirling since September 2019, when Berkshire completed the biggest-ever yen-denominated bond sale by a non-Japanese borrower.
Japan’s trading houses have roots dating back hundreds of years. They supply the resource-poor nation with everything from natural gas to noodles, and have spent the last few decades transforming into conglomerates that hold equity stakes in hundreds of companies around the world. While they’ve diversified into areas such as textiles and machinery, they still derive much of their revenue from energy, metals and other commodities.
Berkshire said it plans to hold the Japan investments for the long term and has pledged to only own as much as 9.9% of the shares in any of the five companies, unless given specific approval by the firm’s board of directors.
“It’s bright news for not only the company but also Japan’s stock market,” an Itochu spokesman said. Mitsubishi said it has been contacted by Berkshire but isn’t able to provide further details. Sumitomo said it will engage in dialogue.
The investments represent a notable push abroad by Berkshire, which has long had its biggest holdings in U.S. companies including Apple Inc. and Coca-Cola Co. Buffett said in 2018 there was a good number of countries he’d be willing to invest in, although foreign firms didn’t turn to Berkshire for funding as quickly as U.S. companies might. Berkshire’s offshore wagers include China’s BYD Co. and Brazilian payment company StoneCo Ltd.
This isn’t the first time Buffett has invested in multiple competitors from one sector. Berkshire took stakes in four major U.S. airlines in 2016, though it ended up selling in 2020 as the pandemic brought most air travel to a halt. The company, which has a stock portfolio valued at about $207 billion at the end of June, is also a major investor in several U.S. banks.
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Three Foothills units placed under 'outbreak watch' as Alberta reports 153 new COVID-19 cases – Calgary Herald
Article content continued
“A unit can be on watch without having any active patient or staff cases.”
AHS added that patients, families, staff and physicians are all notified when a unit is placed under watch.
The outbreaks at Foothills continued to grow Friday. One more patient tested positive for COVID-19, while five more hospital staff were infected. In total, positive cases in 17 patients and 18 health-care workers have been linked to the outbreaks.
More than a dozen more workers at Foothills have also been instructed to isolate, for a total of 136 staff members currently in quarantine. More than 300 staff have been tested for the novel coronavirus since the start of the outbreaks.
No new deaths at Foothills were reported Friday. Three patients have died due to the outbreaks.
AHS said all patients and almost all health-care workers linked to the outbreaks have been identified, with testing underway.
Though the Foothills outbreak continues to expand, Alberta reported Friday that a much smaller outbreak at another Calgary hospital has been declared over. An outbreak at the Peter Lougheed Centre resulted in infections of three people, all of whom have recovered.
153 new COVID-19 cases
Alberta reported 153 new cases of the coronavirus Friday, bringing the province’s total case count since March to 17,343.
The new cases came from 14,211 tests, about a 1.1 per cent positive rate. There are now 1,497 active COVID-19 cases in Alberta, an increase from Thursday. More than half of those cases (773) are in the AHS Edmonton zone.
Alberta reports more than 100 COVID-19 cases for 16th straight day – CTV Edmonton
Alberta reported 153 cases of COVID-19 Friday as active infections increased to 1,497.
The province has added more than 100 cases every day since Sept. 9, when it reported 98 new cases.
Fifty-six Albertans are being treated for the coronavirus in hospital, including the 14 patients who are in intensive care.
Alberta did not report new deaths Friday, keeping the total at 261.
The Edmonton zone continues to have more than half of Alberta’s count with 786 confirmed cases, while the Calgary zone has 518.
Alberta has reported 17,343 cases of COVID-19 to date.
Alberta reports 153 new cases of COVID-19, no new deaths – CBC.ca
Alberta reported 153 new cases of COVID-19 Friday bringing the number of active cases in the province to 1,497, up 35 from the day before.
A total of 56 people were being treated in Alberta hospitals for the illness, including 14 in intensive care.
No deaths were recorded leaving the number at 261.
Three more outbreaks at schools — Calgary’s Clarence Sansom and Glenmeadows schools and Elsie Yanik Catholic School in Fort McMurray — have been reported, bringing the number of schools with outbreaks to 35.
Outbreaks are declared when a school has two or more cases.
Five schools, with five or more cases, are on a provincial ‘watch’ list. Four of those schools are in Edmonton, with Centre High the most recent addition.
The regional breakdown of active cases was:
- Edmonton zone: 786 up 13 from the day before.
- Calgary zone: 518 up 23 from the day before.
- North zone: 129 down one from the day before.
- South zone: 41, up one from the day before.
- Central zone: 16, down three from the day before.
- Unknown: seven, up two from the day before.
To date 968,031 Albertans have been tested for the coronavirus. So far 15,585 have recovered from the disease.
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