In its episode titled ‘Lots More on Why Japanese Stocks Are Surging’, Bloomberg’s Odd Lots podcast features seasoned Japan hand Travis Lundy, describing some highlights of Buffett’s investment in five of Japan’s top capital allocators
Here’s how Buffett described them in his latest letter:
‘Berkshire continues to hold its passive and long-term interest in five very
large Japanese companies, each of which operates in a highly-diversified manner somewhat similar to the way Berkshire itself is run. We increased our holdings in all five last year after Greg Abel and I made a trip to Tokyo to talk with their managements.’
Travis Lundy:
'So what is it about these companies? What is this opportunity or the new Buffett in Japan trade? Well, so that was a fantastic trade. And the reason why it was a fantastic trade was because those companies are really great companies. They are effectively listed private equity funds. They are very competitive. They pay their young people a lot of money. They recruit very, very good personnel. The personnel get trained. They enter a kind of a little pod and go forth and do projects.
Back when Warren Buffett started investing, they were able to buy the projects at, or buy the company at 0.5 times book. That’s pretty good. You generally can’t buy private equity funds at 0.5 times book. And these guys had had a couple of years of bad returns because they were heavily invested in the oil patch, oil and gas. And when oil and gas was very high in 2014 and got crushed in 2015, 2016, these guys had to write off a lot of their investments or write down the investments. So they did. And it got kind of… It stayed weak for a little while. They started buying back some stock, but they were kind of under loved. But they are still very, very good companies for what they do. They are very financially savvy. They are a bit like private equity because most of their investments are non-listed. And they actually have a fair bit more leverage than you can see by looking at their financial statements. But they just manage it well and they got long-term funding. They are super professional. ’
https://www.bloomberg.com/news/audio/2024-03-07/lots-more-on-why-japanese-stocks-are-surging-podcast