International | May 17 2006
By Rudi Filapek-Vandyck
Warren Buffett’s image as the be all and end all of contemporary investing has been seriously dented over the past twelve months. Not only did The Oracle From Omaha unwind his currency positions, aimed at a weakening US dollar, too early, his timing for stepping out of the silver market was poor as well.
However, one quote from the recent Berkshire Hathaway AGM should have attracted everyone’s attention: there are other ways to benefit from a weakening US dollar. What other ways was he thinking of?
Given Buffett’s renowned acumen for valuing and timing long term investments in businesses, it would only seem logical he would be looking into that direction again. And with the US dollar expected to decline over the coming years, especially against Asian currencies, one might be inclined to think Warren Buffett is considering buying assets into the region.
Asian equity specialists at JP Morgan believe there is more than a fair chance Buffett/Berkshire Hathaway are looking into buying Japanese equity, possibly whole companies.
Taking a few rules into account which are well known to be Buffett’s guidelines when making such investment decisions, the team has lined up a list of potential candidates. JP Morgan doesn’t think Buffett stepping into the Japanese market is just a possibility, the analysts believe it is simply "likely" he will do so given his bearish view on the US dollar.
The list of potential candidates consists of well known Japanese names such as Toyota, Honda, Canon, Ricoh, Daikin Industries and Shimamura.
The list also contains names such as Oracle Japan, Hisamitsu Pharmaceutical and Yahoo Japan, but that would be a real world’s first given Buffett’s aversion for anything "technical", in our opinion.
All in all the list comprises of 50 candidates.
Just to refresh everyone’s mind on the subject, here are the basic investment rules Buffett relies upon and which JP Morgan took from the annual report of Berkshire Hathaway: company must have at least US$75m of pre-tax earnings; a demonstrated consistent earning power; earning good returns on equity while employing little or no debt; good management must be in place; the business must be simple (there it is: no technology) and there must be a so-called "offering price". (Buffett doesn’t do unfriendly take-overs).
FN Arena News recently reported Japanese authorities are planning to change their laws to make acquisitions and mergers, including by foreign companies, easier from May next year onwards.
