Warren Buffett has done it again, racking up another profitable investment in the span of a few years.
This time, he went across the Pacific Ocean to the stock bargain basement known as Japan. His surprise bet on five Japanese companies has nearly tripled in size—to $17 billion—in under three years. The surge partially reflects the buying of more shares, but also the companies’ stock prices soaring to multi-decade highs.
Buffett’s Berkshire Hathaway (BRK.B) conglomerate disclosed 5% stakes in five Japanese trading houses—Itochu (ITOCY), Marubeni (MARUY), Mitsubishi (MSBHF), Mitsui (MITSY), and Sumitomo (SSUMY)—in August 2020. Berkshire has ramped up those positions to about 7.4% across the board, Buffett disclosed in May.
Here’s why – and how you can still get in…
Why Japanese Stocks Are Soaring
These five stocks are representative of what is going on with Japanese stocks as a whole recently: Japan’s Nikkei 225 index has jumped nearly 30% this year, far outstripping the gains for the S&P 500 (14.25%). The Nikkei has not been this high for more than 33 years!
Valuations are cheap in Japan and investors are discovering that it has a lot of high-quality technology and manufacturing firms, particularly in the semiconductor sector. For example, Advantest (ATEYY) is a leading manufacturer of automatic test equipment for the semiconductor industry. Its stock is up 150% over the past year and 118% year-to-date.
The reshaping of global supply chains away from China is another plus. This trend could unleash a wave of foreign acquisitions of Japanese manufacturers and facilities. At the least, it is igniting interest in those companies’ stocks.
In addition, authorities at the Tokyo Stock Exchange (TSE) have also been pushing hard on Japan’s many capital-inefficient companies, whose price to book (P/B) ratio is below 1. They either must shape up or face financial penalties.
Keep in mind that, at the time the TSE began its push earlier in 2023, more than half of all TSE stocks were trading below their book value! The reason was often too high a reserve of cash.
Though the penalties are years away, companies are…
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