Warren Buffetts new favorite stocks have had another boost this week after Berkshire Hathaway upped its investment in Japans five biggest trading houses.
Berkshire Hathaways stakes in Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo have now increasedon averageto at least 8.5%, the company confirmed today.
The investment firm also revealed that the aggregate value of these stakes now puts Japan as Berkshires second-largest geographycoming in behind the U.S.
Buffett began investing in Japans trading housesknown as sogo shoshain 2020 and since then has been strengthening his ties to the nation, as well as visiting the country earlier this year.
During that trip, the Oracle of Omaha sat down with bosses of the five companies at the Four Seasons Hotel in Tokyo, with insiders saying the conversation centered around the sogo shoshas move away from commodities.
Ahead of these meetings, Buffett had made it clear he wanted to be the first port of call if the firms were looking to raise funds, telling Nikkei Asia: We would love if any of the five would come to us ever and say, Were thinking of doing something very big, or were about to buy something and we would like a partner, or whatever.
The seasoned investorreportedly worth $118 billion according to Bloombergs Billionaires Indexhas now doubled down on his investments, with Berkshires stakes increasing this week from the 7.4% they sat at previously.
Buffett has previously set a self-imposed ceiling of how much hes willing to sink into the five brands, saying the maximum stake he will hold is 9.9%.
The release adds: The company will make no purchases beyond that point unless given specific approval by the investees board of directors.
Whether or not this cut-off is limited to the five companies in question, or Japanese stock as a whole, remains to be seenthough Berkshire currently holds no other investments in the country.
Berkshire boom
The sogo shosha have enjoyed basking in the light of Buffetts attention.
In the days following the announcement that Berkshire had upped its stakes from 6% to 7.4% overseas investors piled in, buying $7.83 billion in Japanese stocks during five days of trading through April 14.
Some of the stocks got another boost on June 19 following the latest announcement.
Mitsui was up 0.31% over the course of the day with a particular surge in afternoon trading after Berkshires announcement, Mitsubishi was up 0.25% while Marubeni was up 0.22%.
Conversely Itochu was down 0.57% and Sumitomo was down 0.52% over the course of the daythough this is a fraction compared to the increases they have enjoyed this year alone, up 39.6% and 41% respectively.
The shares in the five firms are near their all-time highs.
Markets Insider placed a valuation of $15 billion on Berkshires Japanese assets in May, up from the $6 billion bet Buffett first made back in 2020.
Given this weeks announcement, that top line is sure to swell further, though not everyone is convinced that Japan is a sure winner.
Premature optimism?
A recent note from analysts at Banks of Americaanother of Buffetts most prized investments said the buy Japan call may be premature.
In May strategists Shusuke Yamada and Tony Lin said: We remain bearish on JPY in 2023 despite its cheapness for two reasonsa persistent foreign direct investment (FDI) deficit and a potential rise of yen-carry trade.
The pair suggested a longer-term strategy which is a tactic the team at Berkshire have confirmed they are using, saying the company intends to hold the investments over the long term.
The focus on Japan has also drawn Berkshire away from Taiwan, after the company did a U-turn on a multi-billion dollar investment in Taiwan Semiconductor Manufacturing Company, or TSMC, following concerns about geopolitical tensions with China.
Despite praising TSMC, calling it a fantastic enterprise, Buffett told the companys annual shareholder meeting in May: I feel better about the capital that weve got deployed in Japan than in Taiwan. That is the reality, and Ive reevaluated that in the light of certain things that have been going on.
A week later, Berkshire Hathaway revealed that it had sold its entire remaining stake in the Taiwan Semiconductor Manufacturing Company, exiting an investment the company had disclosed just six months earlier.
