Warren Buffett’s later career advance into Japan has turned into one of his most lucrative investments, with JP Morgan thinking that the “Omaha Orac” has not yet been made. As Buffett approached his 90th birthday in August 2020, Berkshire revealed that he had accumulated over 5% positions in Ituchu, Marbeni, Mitsubishi and Samitomo, Japan’s top trading houses that handle everything from energy to consumer goods. JPMorgan’s calculations show that over the next five years, the five companies’ stock prices have more than tripled, with their best performances skyrocketing by over 500%. “We clearly think it was the Buffett effect that led the trading company’s stock to break out of the long-term stage of relative undervaluation,” JP Morgan said in a note to clients analyzing traders. “The involvement with Berkshire Hathaway as the largest shareholder also had a major impact on the management team’s stock recognition and capital allocation strategies, including shareholder profits.” JPMorgan began reporting on these Japanese companies on Tuesday, including Itochu, Mitsui & Co. , has begun assessing overweight at Marubeni. By the end of 2024, Berkshire’s total cost of holdings was $13.8 billion, but the market value has already risen to $23.5 billion. “Little Handbook” Buffett revealed that he was the first to discover these companies when he read a “Small Handbook,” which lists thousands of public companies in Japan. At the time, these stocks were on sale at a deep discount, but he was drawn to reliable dividends and a diverse cash-generating business. “I was looking into a small handbook with probably 2-3,000 Japanese companies,” he announced in May that he would step down as CEO at the end of 2025 at Berkshire’s annual meeting. Buffett can also hedge the risk of currency by selling Japanese debt, and then pocket the difference between dividends from investments and payments of bond coupons that he will pay. The expected annual dividend income from Japan’s investments in 2025 totals approximately $812 million, with interest costs on Berkshire-denominated debts of approximately $135 million. JP Morgan said that once Buffett was added to trade, Berkshire reached an agreement with businesses above the initial 10% ceiling. In fact, according to the filing, Mitsubishi and Mitsui & Co. Berkshire’s shares had exceeded 10% as of August. “Warren Buffett’s Berkshire Hathaway is hoping to continue building stocks in Big Five companies in the sector at a medium pace for the time being,” Jpmorgan said. Buffett himself revealed that he and his successor Greg Abel have been there for a long time. “In the next 50 years… we won’t think about selling them,” Buffett said in May. “We don’t sell stocks. That won’t happen in decades,” he continued. “Japan’s investments are just in our alleys.” For investors, Buffett’s Japanese bet reminded us that even in his 90s, the legendary stock picker still can surprise the market and hit home runs.
