Warren Buffett celebrated his milestone birthday Sunday the best way he knows how: with a new headline-grabbing stock pick. His pal Bill Gates baked him a cake, too. Although Buffett is known to have a sweet tooth, big juicy deals are more his taste. The nonagenarian billionaire announced that his conglomerate, Berkshire Hathaway Inc., has acquired 5% stakes in five of Japan’s storied trading houses — Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. — in a wager valued at more than $6 billion. That is one pricey birthday gift.
You may be thinking, “First gold, now Japan? Is Buffett feeling all right?” Yes, it was a bit strange, if not disconcerting, when America’s No. 1 cheerleader dumped shares in a bunch of US financial institutions last quarter and bought a position in gold-mining giant Barrick Gold Corp. instead. A bet on bullion certainly doesn’t exude confidence in America’s economic recovery. Now he’s eyeing Japan Inc., which isn’t exactly known for being the world’s bastion of growth either. But Buffett is called the Oracle of Omaha for a reason, and so of course, there’s a simple rationale for his interest in the Japanese trading houses: They’re cheap relative to the cash flow they generate and screen well using Buffett’s familiar investment criteria, David Fickling writes.
In fact, Fickling found that three of the 10 companies worldwide that meet Buffett’s criteria are Japanese trading houses. The soga shosha, as they’re known in Japan, also look less like a tangle of commodities-focused assets these days, and more like their own versions of Berkshire Hathaway itself, as Anjani Trivedi explained in a prescient 2018 column.
Speaking of Buffett, this is one dealmaker whose deals rarely ever leak. Part of the reason is that Buffett keeps a close circle, choosing to sidestep bankers and work directly with sellers.
He also isn’t much for computers or email, preferring a good old fashioned phone call. Even though traders constantly speculate on Berkshire’s next pursuits, more often than not they’re wrong. But something fishy keeps occurring with transactions involving other companies: Their stock prices are reacting to deal news before it happens. That was the case when Google took a stake in ADT Inc. this month, and when Google announced its takeover of Fitbit Inc. Likewise, shares of Tiffany & Co. behaved curiously before LVMH Moet Hennessy Louis Vuitton SE made its bid public. Last we checked, Silicon Valley’s engineers haven’t yet developed a desktop crystal ball, so it sure sounds like illegal insider trading is taking place.
It’s troubling that nobody seems to be doing anything about it, writes Matthew A. Winkler. He wants to know, where are the regulators?
One prediction investors wish they could make is who will win the US presidential election. Polls show Joe Biden is still ahead; betting sites, however, reveal that his lead over Donald Trump has collapsed. One explanation, John Authers writes, is that the mayhem after last week’s shootings in Kenosha, Wisconsin, is lifting the Trump campaign. So far, the president’s response to the deadly events has mostly amounted to vague “law and order” tweets. Even so, Authers observes, “bettors appear to believe that the disorder will help Trump throughout the country.”
Bloomberg
