Buffett's Japan bet hits $20B and his donations top $50B

FRI, JUN 23, 2023

WARREN BUFFETT WATCH

Berkshire's growing bet on Japan is now worth $20 billion

The market value of Berkshire Hathaway's increased stakes in five Japanese "trading house" conglomerates is now just short of $20 billion as the stocks continue to rally.

Back in August 2020 when Warren Buffett first revealed Berkshire had acquired stakes of around 5% in the companies, we estimated they were worth a total of around $6.25 billion.

In a news release this week, Berkshire says its ownership interest in Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo "now averages more than 8½%."

The company says that calculation excludes treasury stock, which are shares that have been bought back by the issuing company.

The stakes reported by Berkshire to the Japanese government's Financial Services Agency in filings this week apparently include those shares in the denominator as they range from 7.5% to 8.3%.

Stock price gain is calculated using June 1, 2020 to illustrate the increases since around the time Berkshire began buying the shares. When Buffett first revealed the holdings in November 2020, he said they had been purchased over a roughly 12-month period.

Berkshire says the total value of its Japanese holdings "considerably exceeds that of Berkshire-held public stocks in any other country outside of the United States."

It intends to keep them for "the long term" and may go as high as 9.9% for any of the five. It won't, however, go beyond that point "unless given specific approval by the investee's board of directors."

(According to a CNBC Pro article, however, Jefferies analyst Thanh Ha Pham thinks Berkshire could "go beyond the 10% threshold as the relationship between Japanese trading houses' management and Warren Buffett remains robust with mutual understanding of the business model and management style.")

Buffett's enthusiasm for Japan has encouraged other international buyers, contributing to a 33-year high for the benchmark Nikkei 225 stock index.

Corporate governance reforms along with low inflation and a weaker yen have played a major role in the country's stock rally. (Berkshire is protected from currency fluctuations because it's buying its Japanese stocks with yen-denominated debt issues.)

BlackRock CEO Larry Fink also tells Nikkei Asia that geopolitical risks and China's sluggish economy are playing a role. He says international investors are "de-emphasizing China because they're worried about China's economy, and they're investing in Japan as they want to continue with their Asian exposure."

But Bloomberg warns that technical market patterns indicate the stocks Buffett has been buying "may be ready to take a breather after they surged to records amid a flurry of analyst upgrades."

Buffett's donations top $50 billion

Warren Buffett made his annual donations to charity this week, giving away Berkshire Class B shares worth a total of just under $4.64 billion at their current price.

The Bill and Melinda Gates Foundation received about $3.5 billion in stock, the Susan Thompson Buffett Foundation, named for his first wife, got $354 million, while three foundations run by his children were given $248 million each.

While the number of shares he gives away decreases by 5% each year, a 22% increase in the stock's price means the value of this year's gifts is about 16% higher than last year's $4.00 billion.

In Berkshire's news release, Buffett notes what he calls the "interesting" math behind his "lifetime commitments" to the five foundations.

When he initially set up his schedule of annual donations in 2006, his Berkshire shares were worth about $43 billion.

Warren Buffett listens while Bill and Melinda Gates look on during a news conference in New York, June 26, 2006, at which Buffett announced he would be giving the bulk of his fortune to the Gates Foundation. REUTERS/Shannon Stapleton

In the following 17 years, he gave away stock worth a total of around $50 billion at the time of the gifts, "substantially more" than his entire net worth in 2006.

Now his remaining Berkshire stock is worth about $112 billion.

Buffett is quoted as saying, "Nothing extraordinary has occurred at Berkshire; a very long runway, simple and generally sound decisions, the American tailwind and compounding effects produced my current wealth."

And there's more to come. Buffett reminds us that "my will provides that more than 99% of my estate is destined for philanthropic usage."

If Buffett had held onto all those shares instead of giving them away, his net worth would be in the vicinity of $244 billion, just ahead of Elon Musk's estimated $236 billion.

BUFFETT AROUND THE INTERNET

Some links may require a subscription

Barron's (subscription): Berkshire Hathaway Is Stronger Than Ever. Thank Warren Buffett.

Reuters: U.S. philanthropist [Howard] Buffett raps international response to Kakhovka dam destruction

Corporate Compliance Insights: When in Doubt, Apply Warren Buffett's Newspaper Test

TheStreet: Buffett's Berkshire Hathaway: Another Opportunity to Buy the Dip

CNBC Pro (subscription): Chamath Palihapitiya calls Warren Buffett the 'GOAT' after figuring out his Japanese bet

Inc.: Warren Buffett Says Living a Successful Life Really Boils Down to 3 Things

HIGHLIGHTS FROM THE ARCHIVE

How Buffett decides it's a time to sell a stock (2002)

While Warren Buffett prefers to hold rather than sell stocks, he will sell when he thinks a company's "long-term competitive advantage" has weakened.

BERKSHIRE STOCK WATCH

BERKSHIRE'S TOP U.S. STOCK HOLDINGS - June 23, 2023

Berkshire's top holdings of disclosed publicly-traded stocks in the U.S., Japan, and Hong Kong, by market value, based on today's closing prices.

Holdings are as of March 31, 2023 as reported in Berkshire Hathaway's 13F filing on May 15, 2023, except for:

Mitsubishi and Mitsui, which are as of June 12, 2023. Tokyo Stock Exchange prices are converted to U.S. dollars from Japanese yen.
Occidental Petroleum, which is as of May 30, 2023

The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.

By popular demand, the five Japanese "trading house" stocks have been added to the tracker.

QUESTIONS OR COMMENTS

Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.)

If you aren't already subscribed to this newsletter, you can sign up here.

Also, Buffett's annual letters to shareholders are highly-recommended reading. There are collected here on Berkshire's website.

-- Alex Crippen, Editor, Warren Buffett Watch