Halls of Shrewd'm / US Policy❤
No. of Recommendations: 15
Some of Buffett's favorite long-term holdings have been crashing down to levels last seen in 2023: Japanese trading houses Mitsui, Mitsubishi, Marubeni, Itochu und Sumitomo.
As I write some of them are down 15% at the TSO, after losing similar amounts during the last two trading sessions.
Buffett initiated his positions in 2019/20 when the trading houses were trading far below their BVs. After trading at a rare premium to BV in recent times, they are now back to around BV (on average).
That said, they had been evident momentum plays for some time and are still up 3-4x compared to 2020 - at least in JPY. Since the JPY has weakened significantly over the past few years, in other currencies the gain is less.
Talking about currency, these trading houses have significant exposure to non-Japanese assets and their BV will shrink a lot alongside their earnings if the JPY strengthens, although, for non-Japanese investors at least, those reduced BV and earnings would be worth more at that point.
The current panic is likely only partially motivated by those issues. I suspect many Buffett-piggybackers are getting cold feet. In addition, having become the poster child of the recent stock market boom in Japan, as the market is about to hit a difficult stretch, clearly has a flip side.
Buffett is already very close to the 10% ownership cap he agreed to, and given ongoing share repurchases by the trading houses and no recent JPY bond issuance by BRK, I don't expect him to add significantly to his stakes.
For other investors, however, this might be a nice opportunity: These companies are broadly diversified, are regularly generating very decent ROE around 15%, pay nice dividends and are increasingly buying back shares (also pushed by new regulations seeking to improve the capital structures of Japanese public companies).
No. of Recommendations: 1
As many, I have cash ready to be utilized and coat-tailing WEB is one thought for deployment.
Selling puts on these companies is on idea, but there are none in US on ADRs.
If go long, isn't currency risk an issue, and if so how best to hedge?
"Best" criteria may include "easiest" if "easiest hedge" does a reasonable job, but "optimal hedge" is complicated.
No. of Recommendations: 0
coat-tailing WEB
I've been "coat tailing" WEB on OXY for the last few months by buying shares and by repeatedly selling puts each month. So far all but one month have expired worthless, but as of today, it seems likely that I'll own some more OXY in two weeks from today (my Aug puts are 57.5 strike).
No. of Recommendations: 4
If go long, isn't currency risk an issue, and if so how best to hedge?
"Best" criteria may include "easiest" if "easiest hedge" does a reasonable job, but "optimal hedge" is complicated.
The best would be to take out a loan in yen, ideally secured by the stocks you're buying. That is what Berkshire did, but is admittedly pretty tricky for most people. Wealth management banks will often do it for you, though they will want quite a lot of security for the loan.
Second best in terms of matching the correct hedging effect at low cost would be to buy the stocks and sell some yen futures. The problem with this is that one side will definitely move against you. Other than being hard to watch (the case for all hedging), if the yen rises you will make money on a mark-to-market basis on the stocks (measured in dollars), but you will lose CASH money immediately from the futures: that cash has to come from somewhere. So this really only works if you're keeping a substantial cash pile around.
If your bullishness were on the whole Japanese market rather than just the sogo shosha, a cute way to do it would be to go long yen-denominated futures contracts. This is a wager that the index will rise denominated in yen, nothing else. These future do exist, but I'm not sure what jurisdictions and brokers make them available.
Jim
No. of Recommendations: 6
but as of today, it seems likely that I'll own some more OXY in two weeks from today (my Aug puts are 57.5 strike).
This also suggests that Mr Buffett might be back in the market buying more OXY today.
He seems to have been buying at every opportunity under $60, rather relentlessly.
Jim
No. of Recommendations: 5
I’m letting Warren manage my Japanese exposure.
But, I have been nibbling here at OXY. Small though because I have no way to predict Oil prices.
Back in the day, I did ok buying BNI below him.
