Legendary investor Warren Buffett has increased his investment in Japan’s largest trading houses, prompting a boost in the stock.
Key Details
- Warren Buffett’s Berkshire Hathaway increased its investment in Japan’s Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo to an average of at least 8.5%, Fortune reports.
- With the increased investment, Berkisre confirmed that Japan is now the firm’s second-largest geography—just behind the U.S.
- In April, Buffett visited Japan after increasing his investment in the country’s trading houses.
- The Oracle of Omaha has been increasing his investments in the island nation since 2020, and each time his interest has boosted the Japanese market.
Why it’s news
Buffett’s initial investment in Japan surprised some investors as the Japanese market has not been a major hub of investment. However, Buffett is known for selecting stocks that he believes are undervalued.
During his trip to Japan, Buffett reportedly sat down with the leaders of Japan’s trading houses—called sogo shosha—to discuss the trading houses’ move away from commodities, Fortune reports.
Buffett told Nikkei Asia he wanted to be the first phone call if any sogo shoshas were looking to raise funds.
“We would love if any of the five would come to us ever and say, ‘We’re thinking of doing something very big, or we’re about to buy something, and we would like a partner,’ or whatever,” Buffett says.
While Buffett has increased his investment to an average of 8.5%, he has previously stated that the maximum investment he will place in the firms is 9.9%. Any investment beyond that point would require Berkshire board of directors’ approval.
Buffett’s interest in Japanese stock has continued to bring positive results for the trading houses. Following an earlier announcement that Buffett had increased his investment from 6% to 7.4%, more foreign investors poured into the Japanese market, buying up around $7.83 billion in Japanese stocks over five days, Fortune reports.
With the most recent announcement, the stocks saw another boost. All five of the trading houses are near their all-time highs.
In 2020, Markets Insider estimated Buffett’s Japanese investments had a $6-billion valuation. Now, that number is closer to $15 billion.
Despite Buffett’s strong track record of smart investments, not every analyst is convinced that his Japanese interests are a good move. In a recent letter from one of Buffett’s most prized investments, Bank of America said that “buy Japan” may be “premature.”
The Bank of America strategists Shusuke Yamada and Tony Lin urged caution, saying, “We remain bearish on JPY in 2023 despite its cheapness for two reasons—a persistent foreign direct investment (FDI) deficit and a potential rise of yen-carry trade.”
Berkshire has confirmed that it is approaching the investments with a long-term strategy in mind—something Yamada and Lin suggest in their note.
