Warren Buffett Doubles Down On Japan
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Warren Buffett’s highly anticipated annual letter to Berkshire Hathaway (NYSE: BRK.A) shareholders, released on February 22, 2025, offered valuable insights into the company’s performance and future outlook.
Despite Berkshire’s substantial cash reserves of $334.20 billion, nearly double the $167.60 billion from the previous year, Buffett reaffirmed his long-standing preference for equity investments over cash holdings.
In his letter, Buffett expressed strong confidence in Greg Abel, his designated successor as CEO.
He likened Abel’s capabilities to those of his late partner Charlie Munger, stating that Abel “has clearly demonstrated his capability to act” when significant investment opportunities arise.
This endorsement suggests a smooth transition of leadership when the time comes, maintaining Berkshire’s investment philosophy and operational strategy.
A notable development highlighted in the letter was Berkshire’s increased investment in Japan’s top five trading houses.
The company has raised its stakes in Mitsubishi, Mitsui, Itochu, Marubeni, and Sumitomo to around 9%, up from the previously reported 7-8%.
This move underscores Berkshire’s long-term confidence in these “sogo shosha” firms, which operate across various sectors including commodities, shipping, and steel.
Buffett revealed that Berkshire paid ¥1.6 trillion ($10.63 billion) for these stakes, which were valued at ¥2.9 trillion by the end of 2023, representing unrealised gains of 61% or $8 billion.
This significant appreciation demonstrates the success of Berkshire’s investment strategy in the Japanese market.
While Buffett did not provide detailed explanations for recent stock sales, including partial divestments from Apple and Bank of America, he emphasised Berkshire’s long-term investment philosophy.
The letter reiterated the company’s approach of seeking value and holding investments for extended periods, a strategy that has proven successful over decades.
Buffett also addressed the importance of acknowledging and learning from mistakes, noting that he has used the words “mistake” or “error” 16 times in his letters over the past five years.
This transparency contrasts with many other large companies that rarely admit to errors, highlighting Berkshire’s commitment to honest communication with shareholders.
Looking ahead, Berkshire’s substantial cash reserves and diverse portfolio position the company well for future opportunities.
Sources: eToro, MarketScreener
