Berkshire's Japan Buying Spree: Abel's Strategy or Buffett's Legacy?

Berkshire Hathaway continues its aggressive expansion into Japanese trading houses, with new filings revealing increased stakes in Mitsubishi and Sumitomo. As of April 30, Berkshire’s Mitsubishi stake rose to 11.1% from 9.7%, and its Sumitomo stake reached 10.3% as of May 12, up from 9.3%. These moves underscore a deepening commitment to Japan’s five major trading houses, a strategy initiated by Warren Buffett in 2020.

Abel Takes the Reins

New CEO Greg Abel has been instrumental in these purchases, having been involved in Berkshire’s Japanese investments for several years. The additional buying suggests Abel is doubling down on a proven strategy, even as he reshapes the U.S. portfolio. The Wall Street Journal had reported that Abel would sell many stocks formerly managed by Todd Combs, who left for JPMorgan. Indeed, Berkshire’s first-quarter 13F filing showed a significant reduction in holdings, but the Japanese positions are growing.

Mystery in the Portfolio

While the Japan buying spree is clear, the 13F filing also revealed puzzling additions: Delta Air Lines and Macy’s. Buffett’s historical aversion to airlines—he once said a “farsighted capitalist” should have shot down Orville Wright—makes the Delta re-entry surprising. Some analysts speculate that Abel or Buffett’s remaining influence could be behind these small bets. Buffett, still chairman, told CNBC he makes investment calls but won’t do anything Abel thinks is “wrong.”

Meanwhile, the Japanese trading houses offer a stark contrast. They are diversified conglomerates with strong cash flows, similar to Berkshire itself. The increased stakes, now worth nearly $46 billion combined, signal confidence in their long-term prospects. Berkshire may also be buying more shares of the other three trading houses—Itochu, Marubeni, and Mitsui—but filings are only required when holdings increase by 1% or more.

Market Implications

The Japan buying spree comes as Berkshire’s cash pile remains massive at $373.3 billion as of December 31. With limited U.S. opportunities, Abel is deploying capital where value exists. Bank of America analysts recently highlighted top stock-buying opportunities, but Berkshire is looking abroad. The trading houses benefit from global commodity demand and Japan’s economic recovery, making them a hedge against U.S. market volatility.

Investors should watch for further disclosures. If Berkshire’s stakes in the other three houses also rise, it could signal a full-scale commitment to Japan. Abel’s strategy appears to be a blend of Buffett’s value principles and his own conviction in international diversification.

Key Takeaways

1. Berkshire increased its Mitsubishi stake to 11.1% and Sumitomo to 10.3%.
2. Greg Abel is leading the Japan buying spree, continuing Buffett’s legacy.
3. The U.S. portfolio is being streamlined, with Delta and Macy’s as curious additions.
4. Japan trading houses offer stable cash flows and diversification.
5. Berkshire’s cash pile remains high, enabling further purchases.

Sources: CNBC - Lingering Mysteries from Berkshire's Portfolio Update, CNBC - Bank of America Says These Stocks Have Major Upside, CNBC - Rubio's Trip to India.