In 2020, Buffett’s company invested in 5 Japanese trading companies for a total investment of $6 Billion. The worth now is over $17 Billion. Warren Buffett has never disappointed and has consistently demonstrated a knack for spotting undervalued companies and making calculated, often surprising moves.
One of his more recent ventures took an unexpected turn to the Far East, with stakes in 5 Japanese companies ballooning to $17 billion in less than 3 years. There an many who has doubts about his investment soundness at his age of 92. He has many investors that work for him at Berkshire and have their own autonomy including Todd Combs and Ted Weschler, though he still runs Berkshire Hathaway (BRK.A -0.71%) (BRK.B -0.15%), the firm that he took over in 1965 and built into one of the largest conglomerates in the world.
It is pretty evident that Buffett is still one of, if not the greatest investors to ever do it. Not only does Warren Buffett stock market investment performance is top notch his stock trade close to all-time highs. His recent moves have shown just how good he is. Buffett’s foray into Japanese stocks is one of them.
Venturing beyond US market
Buffett has utmost respect and admiration for the U.S., clearly stating to the investors immediately after the pandemic began in 2020 to never bet against America. Buffett has not been afraid to invest outside the U.S.
Several Brazilian, other parts of Latin America, and also Japan stocks is where Berkshire has invested in. In the middle of 2020, Berkshire revealed roughly 5% passive stakes in 5 of Japan’s largest general trading companies, otherwise known as sōgō shōsha:
- Itochu (ITOCY 1.40%)
- Marubeni (MARUY 1.53%)
- Mitsubishi (MSBHF 2.13%)
- Mitsui (MITSF 3.17%)
- Sumitomo (SSUM.Y 1.91%)
Buffett’s liking for these Japanese trading companies is also due to similarity with Berkshire Hathaway and also extremely cheap valuation during the buy.
The operation of most of these companies are kind of similar to Berkshire in the sense that they do many different businesses including finance, energy, food, raw materials, and digital businesses. One of Itochu’s core businesses is actually in the textile industry, which is what Berkshire Hathaway began as decades ago. Mitsubishi is Japan’s largest trading company.
“I just thought these were big companies. They were companies that I generally understood what they did. Somewhat similar to Berkshire in that they owned lots of different interests,” Buffett told CNBC earlier this year. “And they were selling at what I thought was a ridiculous price, particularly the price compared to the interest rates prevailing at that time.”
As a value investor, Buffett likes to find assets trading below their intrinsic value and that he believes the market is not properly valuing. Most of the Japanese trading companies that he bought shares in have seen their valuations on a price to tangible book basis, which looks at a company’s market value compared to its net worth, rise since Buffett and Berkshire made the announcement regarding their investments in 2020.
Investing more in Japan
Berkshire’s initially invested around $6 billion in these 5 companies and is now worth more than $17 billion, which makes them fairly large positions, even when you think about Berkshire’s massive $352 billion plus equities portfolio.
Not only has Buffett said he likes these Japanese trading companies because of their valuations and the fact that they operate in industries Berkshire operates in, but also because all 5 of these companies are focused on the long term outlook and are big enough to make a noticeable impact on Berkshire’s earnings.
Nomura Asset Management UK’s Senior Client Portfolio Manager Andrew McCagg also speculates that Buffett and Berkshire likes the fact the Japanese government is pushing domestic listed companies to return more capital to investors, and Buffett has always been a big fan of capital returns.
It looks like Buffett is only just getting started in Japan. In May, the Oracle of Omaha revealed he had upped his stake in these 5 trading companies to roughly 7.4% each and he has said previously that he could up his stake in each company to 9.9% if Berkshire wanted to. Buffett even said he’s open to partnering with either of these trading companies on potential deals in the future.
Buffett’s foray into Japan shows that he is still quite an extraordinary investor and is not afraid to take the unconventional road.
