Buffett hikes stakes in five Japanese trading houses to almost 10% each

Warren Buffett, the legendary investor known as the “Oracle of Omaha,” has been making some interesting moves in the stock market recently. While he has been selling off U.S. equities, he has been increasing his holdings in Japanese stocks. Berkshire Hathaway, Buffett’s holding company, has raised its stakes in five Japanese trading houses – Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. These stakes now range from 8.5% to 9.8%, showing Buffett’s growing interest in the Japanese market.

In his annual letter in 2024, Buffett reiterated his commitment to these Japanese investments for the long term. Berkshire has even reached an agreement with the companies to go beyond the initial 10% ceiling. These five trading houses are the largest in Japan and operate across various sectors domestically and internationally, much like Berkshire itself. Buffett first invested in these companies back in 2019 and has been impressed with their management, investor relations, and capital deployment strategies.

One interesting aspect of Buffett’s investment strategy in Japan is his use of currency hedging. He sells Japanese debt to hedge against currency risk and then profits from the difference between dividends from the investments and the bond coupon payments. By the end of 2024, the market value of Berkshire’s Japanese holdings had reached $23.5 billion, with an initial cost of $13.8 billion.

Buffett first revealed his Japanese investments on his 90th birthday in 2020 and has been steadily increasing his positions since then. In 2023, he even visited Japan with his designated successor, Greg Abel, to meet with the heads of the Japanese firms. Buffett has expressed his desire for Berkshire to own these companies indefinitely.

On the flip side, Buffett has been actively selling off U.S. stocks and increasing Berkshire’s cash reserves, which now stand at a record $334 billion. In 2024, Berkshire sold over $134 billion worth of stocks, mainly by reducing its holdings in Apple and Bank of America.

Overall, Buffett’s love for Japanese stocks seems to be growing stronger, while he continues to make strategic moves in the U.S. market. It will be interesting to see how his investments in Japan evolve in the coming years.