Feb 25, 2024 - Business

Warren Buffett's foreign caution

Illustration of a one hundred dollar bill sealed inside a bubble wrap envelope

Illustration: Annelise Capossela/Axios

Warren Buffett's most recent shareholder letter is interesting mostly for what he says about investing in foreign companies — something he's doing some of, but still in tiny quantities given the size of his balance sheet.

Why it matters: Most U.S. investors are massively underweight foreign stocks, given their capitalization. Buffett is no exception.

The big picture: "I can't remember a period since March 11, 1942 – the date of my first stock purchase – that I have not had a majority of my net worth in equities, U.S.-based equities," writes Buffett, italicizing "U.S.-based" for extra emphasis.

  • "Outside the U.S.," he adds, "there are essentially no candidates that are meaningful options for capital deployment at Berkshire."

Between the lines: Berkshire is well known for making a major investment in Chinese carmaker BYD in 2008, but Buffett sold most of those shares last year.

Where it stands: Berkshire spent ¥1.6 trillion ($10.6 billion at current exchange rates) buying a roughly 9% stake in five major Japanese companies: Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo.

  • Those shareholdings are now worth ¥2.9 trillion — an 81% increase in yen terms, or a 61% increase in dollar terms.
  • Buffett didn't use his monster $168 billion cash hoard to buy the Japanese stocks, however. Instead he borrowed ¥1.3 trillion on the Japanese bond market, making this more of a relative-value play than a true Berkshire-style lifelong investment.

The bottom line: Buffett doesn't go into detail about why he's so averse to foreign investment opportunities, beyond mentioning that he feels that he has no ability when it comes to forecasting foreign-exchange movements.

  • Still, U.S. investors who worry that they're unfairly neglecting the rest of the planet can at least reassure themselves that they're in stellar company.
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