Buffett's Japan Play: Why Investors Shouldn't Sleep On These Stocks, ETFs

Warren Buffett, the legendary investor and chairman of Berkshire Hathaway, has been quietly building a significant stake in Japan's five largest trading houses over the past six years. This move, which Buffett has termed a "small but important exception" to Berkshire's U.S.-based focus, has caught the attention of investors worldwide. As Buffett's annual letter to shareholders revealed, his company has invested in Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo, with a total cost of $13.8 billion and a market value of $23.5 billion as of last year. The annual dividend income from these investments is expected to reach approximately $812 million by 2025.

Buffett's investment strategy in Japan aligns with his long-term, value-oriented approach. He first began acquiring shares in these companies in 2019, impressed by their financial records and the low prices of their stocks. As the years have passed, Buffett's admiration for these companies has consistently grown, appreciating their capital allocation strategies, management, and investor relations. These companies demonstrate shareholder-friendly practices, increasing dividends when appropriate, repurchasing shares when advantageous, and maintaining executive compensation programs that are significantly less excessive than those of their U.S. counterparts.

Berkshire's holdings in these Japanese trading houses are intended to be long-term, with a commitment to supporting their boards and keeping holdings below 10% of each company's shares. However, with Berkshire approaching this limit, the five companies have agreed to moderately relax the ceiling, allowing Berkshire to further increase its ownership. This move signals Buffett's confidence in the long-term prospects of these companies and his commitment to supporting their growth.

Investors should take note of Buffett's investment in Japan, as it highlights the potential for significant long-term growth and value creation in the Japanese market. While U.S. stocks have left Japanese stocks in the dust in the last decade, Buffett's investment may signal that it's finally time for Japan to shine. By diversifying their portfolios and investing in these Japanese trading houses, investors can tap into the potential for long-term growth and value creation, while also mitigating risk through diversification.



In conclusion, Warren Buffett's investment in Japan's five largest trading houses is a testament to his long-term, value-oriented approach to investing. By appreciating the capital allocation strategies, management, and investor relations of these companies, Buffett has identified a potential goldmine for long-term growth and value creation. Investors should not sleep on these stocks and ETFs, as they present an opportunity to diversify their portfolios and tap into the potential for significant long-term growth in the Japanese market.