Credit Suisse Suggests These Six Global Stocks As 'Buffett-Style' Picks

According to Credit Suisse, Buffett's Berkshire Hathaway has raised its stake in five Japanese stocks - an indication that Japan is becoming more attractive to investors.

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Credit Suisse stated in a note dated April 14 that these developments, together with Berkshire Hathaway's recent issuance of JPY bonds, have heightened attention to the investment opportunities available in Japan in terms of pricing and quality.

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In an interview last week, Berkshire Hathaway Chairman and CEO Warren Buffett revealed that he had increased his stake to a total of 5 percent in five Japanese trading houses and that he may consider making further investments.

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Mitsubishi Corp., Mitsui & Co., Itochu, Marubeni, and Sumitomo are the five companies in which Berkshire Hathaway has a 7.4% stake each. 

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I would say that those five names seem to meet Buffett's criteria for stock selection. With a forward price-to-earnings ratio of 6.8, they have considered value stocks with lower-than-average share prices and a dividend yield higher than their Japanese peer companies, among other things, as well as having a lower than average forward price-to-earnings ratio.

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The stocks that Buffett acquired in August 2020 have more than doubled in value since he first acquired them, and four of them have now reached record levels.

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Credit Suisse analysts have screened for Japanese stocks that have characteristics similar to Buffett's holdings as a result of these developments.

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The bank used the following screening criteria.

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Value: Companies with high earnings yields among those selected by the bank.

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Quality: positive free cash flow and a high return on the stock.

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Safety: Over three times the interest payments are covered.

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It should not have been the case in the past five years that the stocks have had no dividend payments from the company. In addition to having an above-median dividend yield, they should also have a five-year dividend growth rate and a 12-month dividend growth rate that is above the median.

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In value investing, earnings yield is a measure used by value investors like Buffett. It is defined as profit per share divided by share price. An investor is getting more value per share if the number is higher.

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A Credit Suisse screen found 11 stocks, including five Buffett investments.

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The six other items are listed below.

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• Sojitz

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• Niterra

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• Sumitomo Forestry

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• Cosmo Energy

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• Haseko Corporation

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• Yamato Kogyo

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