Tuesday, January 3, 2012

Buffett Likes Japan

I was going through my stack of unread magazines, newspapers, newsletters, notes etc... and came across a Nikkei Weekly from November, when Buffett was in Japan.

He has said before that Japan is getting interesting because it is getting cheap.  After the earthquake/tsunami in March 2011, he also said it's a time to buy Japan, not sell. 

In interviews and comments to the Japanese press while in Japan in November, he said that he is interested in large Japanese corporations and have them on his radar.  He also said he would love to get a call from them because he would only be interested in buying a large stake if invited to (I don't know why he wouldn't want to accumulate shares over time like he did IBM), and that if a major corporation called Berkshire, he would fly back to Japan on a moment's notice to get a deal done.

Of course, this is exciting to people who like Buffett and Japanese stocks.

So it did occur to me that it would be an interesting idea to try to figure out which Japanese corporations Buffett would be interested in.  We know he likes sustainable competitive advantages (moats), high returns on capital, reasonable price and all that.  It's not too hard to come up with a mechanical screen to see what would hit Buffett's radar.

But anyway, this is where my thinking on this stops;  Over the past few years, how many Buffett fans would have guessed what Buffett's next big stock purchase is going to be?

Just to name a few big 'surprises' in the recent past:  Burlington Northern, IBM, Lubrizol.  Who'da guessed Buffett would buy IBM?  Or Burlington Northern after spending years explaining to people that he doesn't like capital intensive businesses?  Nobody that I know of and I try to follow Buffett fan sites so am aware of quite a few attempts.

So back to Buffett and Japanese stocks.  The above made me realize that I'm not going to be able to guess what stock it's going to be.  And you know what?  Even if I did guess it, what Buffett is looking for and what I am looking for is not going to be the same thing; he needs to move size, and he needs to buy something he is not going to have to worry about for the next 20 or 30 years.   Of course, I would like an investment like that too, but I am a bit more flexible than that.

In any case, off the top of my head, I can't really imagine what company he would be interested in Japan.  The financials are all pretty much disasters.  I don't think there is a Wells Fargo or American Express over there.  Insurance companies too might be interesting to him, but I don't know that Japanese insurance companies are that well managed or great businesses.  Life insurers are disasters, I think.

Most of the major blue chips that I've looked at over the years are low margin and/or low return on capital more interested in corporate socialism than shareholder return.

Anyway, it is an interesting question so I will keep it in mind when looking at stuff in Japan, but it won't be something I focus on too much.

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