🤓 Buffett backed the right Japanese company

What’s going on here?

Japanese trading company Mitsubishi announced a buyback, proving that if you want a birthday gift worth keeping, you need to buy it yourself like Buffett.

What does this mean?

Warren Buffett tends to stick to what he knows: cherry cola, ice cream, and US companies with strong prospects that are trading for decent prices. But he treated himself to something a little different on his 90th birthday around three years back. He bought serious stakes in five Japanese trading firms with similar business models – investing in a chocolate box of different types of companies – to Berkshire Hathaway. That trip out of the States paid off. The stock prices of all five have more than tripled since then, with Mitsubishi’s pulling ahead by another 10% on Wednesday after the carmaker promised to buy back a tenth of its own shares.

Why should I care?

For markets: Backing buybacks.

Buffett loves buybacks, even calling their critics “economic illiterates”. The plus side is clear: shareholders can end up with a bigger stake since there are fewer shares in the market. What’s more, because buybacks tend to be a show of confidence, many new investors flock to a stock when they happen, bringing up the price for existing shareholders. Still, even Buffett agrees that they can go awry if a company buys its own shares back at too high a price. Investors won’t bite if the newly increased price is at odds with the company’s profit and prospects, so the stock could end up lower than it started.

The bigger picture: Test your patience.

Japan has successfully turned economy-bruising deflation into a healthy dose of inflation, while government incentives are shaping Japanese companies into profit-making machines. That wasn’t the case when Buffett took his punt, though. This isn’t proof of any truth behind the “Oracle of Omaha” nickname, of course. Instead, it’s a point for long-term value investing, when you spot a bargain with potential and patiently sit on it.

What’s going on here?

Uber announced its first-ever annual profit on Wednesday, which might just be enough to shake its reputation as a loser.

What does this mean?

Uber might’ve replaced the term “hail a cab” in modern vocabulary, but the ride-hailing and food delivery app is still known for posting the biggest loss within a day of debuting on the US stock market. Clearly, though, cash can forgive a multitude of sins. Predictions that Uber would turn its first profit brought investors on board, pushing the company’s stock to an all-time high. This time, that trust was rewarded. Uber did make more than $1 billion in profit last year, promising that the cash would keep coming in. Investors have been burned before, though, so they want Uber to hold itself to account by paying out a dividend – a plea that could be granted or denied as soon as next week.

Why should I care?

For markets: A new attitude.

Tech investors used to scoff in the face of dividends, so enamored with eccentric founders’ visions of world-dominating computer power that they were happy for every spare penny to be funneled straight into the cogs. But nowadays, super-rich US tech firms seem to think they can do both. Meta recently announced its first-ever dividend payment while pledging more investments in the future. Investors were only too happy to have their cake and eat it too, sending the social media giant’s stock up over 20%.

The bigger picture: Amazon won’t budge.

Microsoft, Apple, and Meta all hand out dividends now, but Amazon’s keeping its mitts firmly in its own pockets. The ecommerce behemoth batted off any suggestion of such a policy in a recent conference call, saying that there are plenty of places to put cash besides shareholders’ wallets. Investors must have been brushing up on stoicism: they haven’t taken any frustration out on its share price (yet).