Influential investor Warren Buffett seems to be betting big on Japan as his holding company, Berkshire Hathaway, has raised its holdings in five Japanese trading houses.
According to regulatory filings submitted to Japan’s finance ministry on Monday, the 94-year-old investor from Omaha, Nebraska, raised his stakes across Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo by more than 1 percentage point to about 9.3 percent.
Why It Matters
Buffett is considered one of the greatest investors of all time, to the point that he has been given the nickname of “the Oracle of Omaha.”
His decisions at the helm of Berkshire Hathaway, which he has controlled as the main shareholder since the mid-1960s, are closely followed by other investors, who often look at his actions to figure out what may be unfolding in the markets.
His recent move to increase Berkshire’s stakes in the five Japanese companies comes at a time when the U.S. stock markets are in turmoil due to uncertainty surrounding Donald Trump’s policies. Buffett’s decision seems to suggest that investors should be looking for opportunities outside the U.S. market.
What To Know
According to the Monday filings, Berkshire’s stake in Mitsui saw the biggest increase, going up to 9.82 percent from the previous 8.09 percent. The company’s stake in Mitsubishi went up to 9.67 percent from 8.31 percent; its holdings in Sumitomo climbed to 9.29 percent from 8.23 percent; in Itochu, they went from 7.47 percent to 8.53 percent; and in Marubeni, from 8.30 percent to 9.30 percent.
In Berkshire’s annual letter to shareholders, published last month, Buffett said that the company was committed to its “growing investment in Japan,” which represents “a small but important exception” to its U.S.-based focus.
Berkshire began purchasing shares in Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo in the summer of 2019; since then, the companies have “very successfully” operated “in a manner somewhat similar to Berkshire itself,” Buffett wrote.
Warren Buffett, CEO of Berkshire Hathaway, speaks to the press as he arrives at the 2019 annual shareholders meeting in Omaha, Nebraska, May 4, 2019.
JOHANNES EISELE/AFP via Getty Images
These five companies own interests in a wide range of businesses, many of which are based in Japan but some of which are abroad.
What People Are Saying
Buffett wrote in Berkshire’s latest annual letter to shareholders: “As the years have passed, our admiration for these companies has consistently grown. Greg [Abel, Berkshire Vice Chairman] has met many times with them, and I regularly follow their progress. Both of us like their capital deployment, their management and their attitude in respect to their investors.”
He added: “Each of the five companies increase dividends when appropriate, they repurchase their shares when it is sensible to do so, and their top managers are far less aggressive in their compensation programs than their U.S. counterparts. Our holdings of the five are for the very long term, and we are committed to supporting their boards of directors.”
Jumpei Tanaka, head of investment strategy at Pictet Asset Management Japan Ltd, told Bloomberg that the investment could “provide a sense of security about buying Japanese stocks at a time when the Nikkei is seeing some weakness. The environment surrounding Japanese equities is not as good as it used to be.”
What’s Next
Buffett said that, from the start, Berkshire invested in the five Japanese companies with the idea of keeping its holdings below 10 percent in each company’s shares. But the investor added that the five Japanese companies have agreed to “moderately relax the ceiling,” leaving room for further investments.
According to the company’s annual letter to shareholders, Berkshire is likely to keep these holdings for “many decades.”
While Berkshire’s investment in the five Japanese trading houses have previously had the effect of boosting the Tokyo stock market, experts have warned that this time the company’s move might have a smaller impact due to uncertainty over Trump’s tariffs.