Intelligent Finance APP has learned that the Japanese trading giants favored by 'stock god' Warren Buffett have become even cheaper after experiencing recent stock market crashes in Japan and the 'Black Monday' global stock market crash. The basic fundamentals of the five major trading companies, which are incredibly strong, are considered to have fallen into a 'golden pit', providing important buying opportunities for him and 'stock god followers' who follow Buffett’s investment strategy.

Since the mid-July stock market crash in Japan, the five major Japanese trading companies owned by Warren Buffett have undoubtedly become 'cheap goods'. Individual or institutional investors who follow Buffett's investment decisions may have recently started new positions or increased their holdings in the five major trading companies and waited for the growth of earnings figures. In the Japanese stock market collapse caused by the fierce closure of the yen arbitrage trade, the stock prices of these five major trading companies with strong fundamentals also fell sharply due to large-scale selling pressure.

In 'Black Monday', the global stock market crash as of Monday's closing on the Japanese stock market, the under the signature of the 'Stock God' Warren Buffett the holding value of the Berkshire Hathaway investment portfolio, which did not reduce its holdings in the five major Japanese trading companies, may have lost about 98 billion yen (about $6.7 billion). But as the Japanese stock market has rebounded successively on Tuesday and Wednesday, the loss of the Berkshire Hathaway investment portfolio may have been reduced to about 55 billion yen as of Wednesday's close.

After selling Apple and Bank of America, will the 'Stock God' buy the five major Japanese trading companies at low prices?

Mineo Bito, President and CEO of Bito Financial Services, said: 'If Warren Buffett could increase his positions at a relatively cheap price, it would be a good deal.' Since 2014, he has been attending shareholder meetings held by Berkshire Hathaway in Omaha, Nebraska, always paying attention to the evolution of 'Stock God' investment decisions.

According to data compiled by institutions, Berkshire Hathaway holds an average of about 8.2% of the shares of the five major Japanese trading companies, Marubeni Corporation, Itochu Corporation, Sumitomo Corporation, Mitsui & Co., Ltd., and Mitsubishi Corporation. These five major trading companies' stock prices were hit hardest with Sony Corp. and Mitsui & Co., Ltd. posting the biggest losses over 31%. Concerns over a sharp rise in the yen that may reduce the large volume of overseas market-based sales are causing stock prices of the trading companies, including the five major companies, to fall more than the decline in the Japanese stock market.

As of Wednesday, Marubeni Corporation and Mitsubishi Corporation's expected P/E ratios have fallen to only 7.5x and 9.1x, respectively, far below the valuation levels of the blue-chip benchmark index Nikkei 225. The expected P/E ratios of the two are roughly the same levels as when Buffett increased his holdings of the five major Japanese trading company stocks between April and June last year.

Hiroshi Namioka, Chief Strategist of Tokyo T&D Asset Management, said: 'Warren Buffett has been very successful in his value investment portfolio, and perhaps he thinks that the current valuation of Japanese stocks is a major low-cost layout opportunity.'

If Berkshire Hathaway decides to increase its holdings of the five major Japanese trading companies, it will have enough cash to make follow-up purchases at a lower level. After substantially reducing its stock portfolio of Apple (AAPL.US), which is the top position in the second quarter, Warren Buffett has fully available cash to buy the five major Japanese trading companies.

Led by Warren Buffett, the conglomerate Berkshire Hathaway recently revealed that it sold nearly half of its stake in this tech giant in Q2. Its holdings are now worth about $84 billion, which is lower than about $140 billion at the end of March, and has pushed up the new record for Berkshire Hathaway's cash reserves to as much as $276.9 billion, with net sells exceeding net purchases for seven consecutive quarters.

Combined with Warren Buffett's substantial reduction of Bank of America's shares recently, these behaviors of hoarding cash in the high-interest-rate context of the United States may be interpreted as that the 'Stock God' seems to be betting on the economic recession in the United States. Berkshire Hathaway did not immediately respond to the media's requests for comments on its holdings in the Japanese stock market.

The 'Nikkei estimation,' which has a strong fundamental base, has been favored by global funds in recent years.

Buffett, who has been dubbed the 'Oracle of Omaha' and the 'Stock God,' first disclosed his holdings in these Japanese trading companies in 2020. He stated that Berkshire Hathaway would not acquire more than 9.9% of these trading companies unless it received special approval from their board of directors. According to reports, Berkshire Hathaway has earned up to 8 billion US dollars from its holdings in these five trading companies as of February.

Buffett's friendly support for the major shareholders of these trading companies is helping to further draw global attention to the Japanese stock market, which hit a historic high in July. Some speculate that he might shift his attention to Japanese insurance companies and banks, but others believe that the billionaire will continue to focus on trading companies and strive to continue cooperation.

Bito said, 'Buffett really likes trading companies because they have similarities with Berkshire Hathaway, which is a conglomerate with various businesses.' 'I don't see any possibility of him selling his holdings in the five major trading companies he holds.'

Japanese blue-chip stocks, including the five major Japanese trading companies with the 'Nikkei estimation' designation, have been favored by global investors in recent years due to their solid fundamentals and various initiatives focused on increasing shareholder returns. The 'Nikkei estimation' concept mainly refers to those assets that are severely undervalued but have been earmarked by the 'Stock God' Buffett for additional investment, represented by the five major Japanese trading companies. These Japanese blue-chip companies also offer high dividends, large scale share buybacks, and continuously improving corporate governance.

Due to the weakening of the yen supporting the inflow of foreign funds and the strong stock price performance of many Japanese exporters, as well as the efforts of Japanese companies to increase shareholder value, Japanese blue-chip stocks with the 'Nikkei estimation' designation have continued to attract global investor funds in recent years. This has helped the Japanese stock market outperform most other stock markets globally in 2023, and the Nikkei 225 index broke the record set during the Japanese bubble period of 1989, hitting a historic high in 2024.

The strong performance of the Japanese stock market is partly due to the strong promotion of the 'Nikkei estimation' concept. The Tokyo Stock Exchange has long been helping Japanese companies whose stock prices are lower than their book values or whose asset values are severely undervalued by the market to formulate capital improvement plans. The exchange has also been advocating and promoting large-scale dividends and share buybacks for undervalued Japanese blue-chip companies, further strengthening their corporate governance, actively participating in the exploration and research of new technologies, and competing globally. This is also the origin of the 'Nikkei estimation' concept represented by the five major Japanese trading companies.