AFP, April 29 (Editor Shi Zhengcheng) Although the Japanese market is closed on Monday, news surrounding this market is still flying all over the place. According to comprehensive news from the past two days, Elliott Management (Elliott Management), a well-known activist investor, has bought quite a bit of shares in the “Buffett Love Stock” Sumitomo Corporation (8053.T).

As the so-called “old Wall Street men saw slightly the same thing,” just as Mesozoic investors scolded the AI and biomedical circuit, 79-year-old Paul Elliot Singh also joined the team to explore the value of traditional commerce in the Far East.

Since Buffett first opened a position in July 2019,$Sumitomo (8053.JP)$The stock price has doubled nearly 2.6 times, and it also hit a record high in stock prices last week.

The Japanese market is in line with aggressive investment ideas

According to people familiar with the matter, Elliot Management currently holds “tens of billions of yen” of Sumitomo Corporation shares. Based on Friday's closing price, every 10 billion yen (about 464 million yuan) can buy about 0.2% of Sumitomo Corporation's shares. At the same time, Elliot has also exchanged views with Sumitomo Corporation and shared its views on “how to create shareholder value.” The exact timing of Elliot's transaction and when it was contacted with the company is currently unclear.

Compared with Elliott, Berkshire, which had a 5-year layout, currently holds 8.3% of Sumitomo Corporation's shares, and has stated many times that it intends to further increase its holdings to 9.9%. In mid-April, Berkshire issued 263.3 billion yen bonds, and outsiders generally believe that this money will be used to increase the wealth of the “Big Five Trading Companies.”

Of course, if Buffett is interested in “the value of a good company is undervalued” and the advantage of the low cost of financing in yen, Elliott, as a “Wall Street hunter,” is more interested in the return on investment brought about by improving corporate governance. This is also highly compatible with the Japanese authorities' policy to push listed companies to improve governance and increase shareholder returns.

As a Wall Street capital that is deeply involved in the Japanese stock market, Elliott has promoted Toshiba,$SoftBank Group (9984.JP)$,$Dai Nippon Printing (7912.JP)$Waiting for the company to change, recently it has also been targeted$Mitsui Fudosan (8801.JP)$. According to past experience, after Elliot takes a share, it usually pushes the board of directors to take measures favorable to stock price performance.

For example, two months after news broke about Elliot's shareholding, Mitsui Real Estate announced a plan to sell assets and increase buybacks in April. Meanwhile, in February of last year, in the face of Elliot's pressure, Dai Nippon Printing Co., Ltd. announced the largest repurchase plan ever.

This week is also the day for Japan Commercial Stock Exchange to collectively disclose financial reports. Sumitomo Corporation will publish its 2023 fiscal year report and launch a medium-term business plan on Thursday.

Right now, the timing of the purchase is quite delicate

For the Japanese market, the disclosure of annual reports by major trading companies at the beginning of May this year was also a “hurdle” — affected by falling commodity prices, analysts generally expected, except$ITOCHU (8001.JP)$All four other companies will experience a decline in net profit, and companies need to introduce more shareholder return policies to support doubling stock prices.

Combined with the fluctuation of the yen exchange rate, this also makes Elliott's current timing for opening positions somewhat delicate.

The market expects that by the middle of the fiscal year ending March,$Mitsubishi (8058.JP)$Net profit will drop 17.2% to 977 billion yen,$Mitsui (8031.JP)$, Sumitomo Corporation and$Marubeni (8002.JP)$Profits will also fall by 14.2%, 11%, and 14.4%, respectively. ITOCHU, for its part, will increase slightly by 2%.

Japanese trading company stocks are generally sensitive to commodity price fluctuations, and their performance also depends on their respective portfolios. For example, Mitsubishi and Mitsui are more dependent on the commodity, energy, and metals businesses to contribute half of their profits; ITOCHU, which is not a chaebol, is stronger in the downstream consumer goods business (such as FamilyMart), so revenue is more stable.

Jefferies analyst Pham Thanh Ha said that in addition to commodity prices, currency and inflation are other economic factors that may affect the company's performance. A weak yen may boost performance in financial statements, while inflation is more beneficial to downstream companies.

Just this Monday, the yen experienced a strange scene of rapid depreciation and sharp rise in the market. According to media quoting people familiar with the matter, the Japanese financial authorities intervened when entering the market on Monday afternoon.

Analysts also said that due to maintaining high investor returns, trading companies' sensitivity to economic conditions does not mean that stock prices will fluctuate accordingly. With the exception of Sumitomo, the other four companies have adopted a progressive dividend policy, which means that dividends can only be maintained or increased. This has also brought a lot of attention to Sumitomo Corporation's mid-term management plan on May 2.

$Daiwa Securities Group (8601.JP)$Senior analyst Masayuki Nagano also stressed that the market currently has high expectations for these trading companies, so improving investor returns on a small scale will not make them an immediate target for investors to buy.

Of course, this also shows Buffett's wisdom — buying five major trading companies at the same time. A spokesperson for one of the companies said: “If Buffett does this, it will make us compete with each other.”

Editor/jayden