Buffett’s Looking East

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What’s going on?

Warren Buffett’s Berkshire Hathaway upped its stake in Japan’s five biggest trading houses, according to news out on Monday.

What does this mean?

Buffett sings the praises of American enterprise, but he’s not shy about looking further afield when things get pricey on home turf. And lately the Far East seems to have caught his and Berkshire’s eye with the firm pouring even more money into Japan’s mega trading firms, or “sogo shosha”, shortly after claiming a $5-billion chunk of Taiwanese chipmaker TSMC. And it looks like there’s more to come: when Berkshire picked up its original 5% stake in each firm back in August 2020, it hinted that there was room to buy up to 9.99%. That might be why the sogo shoshas’ stock prices inched higher when the latest news broke.

Why should I care?

Zooming out: Read between the lines.

You might not have Warren Buffett on speed dial, but you can get a sense of what he’s thinking without a one-on-one catch up: Berkshire’s bulked-up stakes in the Japanese trading firms could tell us something about Buffett’s views on inflation. After all, these businesses make money by importing, trading, and investing in all sorts of commodities, from oil to metals and textiles – and the more those materials cost, the bigger the firm’s profit. Reading between the lines, then, this move suggests Buffett could be betting on raw materials getting more expensive down the line.

The bigger picture: Benjamin Buffett.

It looks like the Oracle of Omaha is having a Benjamin Button moment, switching back to his youthful investing style at the twilight of his career. Buffett’s been the poster boy for “quality investing” for decades: that’s a safe, stable investment strategy that focuses on buying great businesses at fair prices. But recent moves – like his big buys in Occidental Petroleum and TSMC – have seen Buffett wade into riskier, more volatile industries, in a throwback to his early “one-last-cigar-puff” bargain-hunting days.

Originally Posted November 21, 2022 – Buffett’s Looking East

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