Berkshire Hathaway Inc (BRK.B)

[gfp927z]

Bar, >> Japanese bank <<

The proposed target bank in the article is Mitsubishi UFJ Financial Group (MUFG), with a market cap ~ $120 bil. But as Prudent Capitalist pointed out, the idea would be for Berkshire to buy a sizable chunk, rather than acquiring the entire bank. MUFG also has a stake in Morgan Stanley (see below), so MUFG sounds like a distinct possibility to be the mystery stock.

Another angle is that with Japan finally reversing their ZIRP / negative % policy, their banking sector could benefit. Unlike most sectors, bank stocks can go up during rising %. So perhaps Buffett had an early 'heads up' on the Japanese % reversal, and he loaded up on MUFG early.


>>> MUFG is the largest bank by assets in Japan. More importantly, it's trading at a reasonably low forward P/E ratio of less than 12, and is valued modestly below its reported book value. High-quality banks trading below their book value have often been a lure that's attracted Buffett. Comparatively, Morgan Stanley is valued about 60% above its book value.

Furthermore, MUFG is actually riding Morgan Stanley's coattails to massive profits since the financial crisis more than 15 years ago. Mitsubishi UFJ Financial Group purchased $9 billion worth of preferred stock in Morgan Stanley following the collapse of Lehman Brothers. This stake in Morgan Stanley has consistently generated between 30% and 40% of MUFG's annual profits in recent years.

Why buy Morgan Stanley stock when Buffett can get exposure to Morgan Stanley via Mitsubishi UFJ Financial Group at a fraction of the cost? I strongly believe MUFG to be the confidential stock Warren Buffett is buying at Berkshire Hathaway. <<<



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