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Buffett’s Visit to Japan May Reveal Opportunities

Sunday, 20 Nov 2011 05:07 PM

Billionaire investor Warren Buffett’s trip to a Japanese plant Monday may shine a light on investment opportunities in a nation hampered by the March earthquake and the global market rout.

Buffett, chairman of Berkshire Hathaway Inc., is visiting Japan for the first time to tour Tungaloy Corp.’s plant in Fukushima prefecture after canceling his trip in March when the country was hit by a record temblor. Iscar Metalworking Cos., an Israeli company that was Berkshire’s largest acquisition of a non-U.S. firm, in 2008 bought a 71.5 percent stake in Tungaloy, which makes tools for cars and planes.

Japan suffered its worst postwar catastrophe as the March 11 quake and ensuing tsunami crippled nuclear plants in Fukushima prefecture. Buffett, who became the world’s third- richest person through long-term value investing, said earlier this year that the disaster created a “buying opportunity.”

“The fact that a renowned investor like Mr. Buffett is actually coming all the way to Japan and to the very place where it became the center of the disaster means a lot and may shine a light,” said Shuhei Abe, president of Tokyo-based Sparx Group Co., Asia’s second-biggest hedge fund. “There are expectations that Mr. Buffett may invest more in Japan.”

Japan Shares Fall

Japan’s stock benchmark Nikkei 225 Stock Average has dropped 18 percent this year, set for the worst annual decline since 2008, as Europe’s escalating debt crisis and a global economic slowdown roil markets worldwide. Buffett, who is also Berkshire’s chief executive officer, has made bullish bets on the index through derivative contracts.

The earthquake and tsunami in Japan left more than 19,000 people dead or missing and led to an overall economic loss of $210 billion, making it the costliest natural catastrophe on record, Munich Re has said. Losses assumed by insurers, which Munich Re estimates at $30 billion, won’t reach the $62.2 billion caused by Hurricane Katrina in 2005, it said.

Buffett, 81, said in a May press conference that he would be “delighted” to invest in Japan, and that his enthusiasm for the market was unchanged from six months earlier.

“Buffett’s investment is beautiful,” said Yutaka Kobayashi, president of Star Mica Asset Management Co., a boutique Japanese private bank. “Looking at the way he invests in this current market condition, it may well be a good time to be buying. His style of long-term investment makes sense under the current market climate.”

IBM, Lubrizol

Buffett broadened the portfolio of Omaha, Nebraska-based Berkshire this year as he built a stake of more than $10 billion in International Business Machines Corp., injected $5 billion into Bank of America Corp. and completed the acquisition of Lubrizol Corp. for about $9 billion. Last year, Berkshire spent $26.5 billion to acquire the 77.5 percent of railroad Burlington Northern Santa Fe Corp. it didn’t already own.

Among Berkshire’s Asian investments are stakes in Chinese carmaker BYD Co. and South Korea’s Posco, the world’s third- largest steelmaker. Iscar has invested in TaeguTec Ltd., a South Korean cutting-tools maker, and Berkshire announced a plan this year to enter India’s insurance market by selling motor coverage as a corporate agent of Bajaj Allianz General Insurance.

Berkshire’s insurance business posted a first-quarter underwriting loss of $1.28 billion pretax, compared with a profit of $345 million a year earlier. The Japan quake cost the firm about $1.1 billion. Buffett said at Berkshire’s annual meeting on April 30 that the insurance industry had its second- worst quarter in terms of catastrophes worldwide.

Buffett has visited nations including South Korea, China, India, Italy, Germany, Spain and Switzerland since early 2008 scouting opportunities for Berkshire.

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Billionaire investor Warren Buffett s trip to a Japanese plant Monday may shine a light on investment opportunities in a nation hampered by the March earthquake and the global market rout.Buffett, chairman of Berkshire Hathaway Inc., is visiting Japan for the first time to...
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2011-07-20
Sunday, 20 Nov 2011 05:07 PM
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