As Warren Buffett has gotten older, many have questioned whether the 92-year-old has still got it when it comes to investing. While Buffett still runs Berkshire Hathaway (BRK.A 0.04%)(BRK.B 0.40%), the firm that he took over in 1965 and built into one of the largest conglomerates in the world, he now has many other investors that work with him at Berkshire and have their own autonomy including Todd Combs and Ted Weschler.
But I think there is plenty of evidence that Buffett is still one of, if not the greatest investors to ever do it. Not only does Berkshire's stock trade close to all-time highs but he's made plenty of recent moves that show just how good he is. One of those is Buffett's foray into Japanese stocks. Let's take a look.
Investing outside the U.S.
While Buffett has always had the utmost respect and admiration for the U.S., explicitly telling investors right after the pandemic began in 2020 to never bet against America, Buffett and Berkshire have also not been afraid to make investments outside the U.S.
Berkshire invested in several Brazilian stocks and other parts of Latin America and also in Japan. In the middle of 2020, Berkshire revealed roughly 5% passive stakes in five of Japan's largest general trading companies, otherwise known as sogo shoshas:
- Itochu (ITOCY 2.44%)
- Marubeni (MARUY 2.31%)
- Mitsubishi (MSBHF 0.65%)
- Mitsui (MITSF 0.25%)
- Sumitomo (SSUM.Y 2.32%)
Most of these companies are kind of like Berkshire in the sense that they operate 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."
ITOCY Price to Tangible Book Value data by YCharts
As a value investor, Buffett likes to find assets trading below their intrinsic value and that he believes the market is not properly valuing. As you can see above, most of these Japanese trading companies 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.
Room to run in Japan
Berkshire's initial $6 billion investment in these five companies is now worth more than $17 billion, which makes them fairly large positions, even when you think about the conglomerate'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 five of these companies are focused on the long-term outlook and are big enough to make a noticeable impact on Berkshire's earnings.
NYSE: BRK.A
Key Data Points
Nomura Asset Management UK's Senior Client Portfolio Manager Andrew McCagg also speculates that Buffett and Berkshire like 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 seems like Buffett is only just getting started in Japan. In May, the Oracle of Omaha revealed he had upped his stake in these five 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 also not afraid to think outside the box.
