In today’s newsletter: Berkshire Hathaway keeps adding to its investment in five Japanese “trading houses” as the stocks continue to rally and Warren Buffett’s multi-year donation plan hits a major milestone.
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.
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.
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.
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.
