After the sustained selling of his stake in key companies, Berkshire Hathaway’s (NYSE: BRK.A, BRK.B) Warren Buffett has turned to bonds, ramping up his cash reserves.
Specifically, Berkshire’s cash reserves grew by an additional $1.9 billion, raised through a Samurai bond issue—its largest bond sale in Japanese currency in the past five years, Reuters reported on October 10.
According to filings, Berkshire Hathaway plans to use the proceeds from the bond sale for general corporate purposes, though it did not specify the exact role. In this regard, there is speculation that Buffett intends to expand his exposure to the Japanese market, which has seen growth in recent years.
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Notably, the investment conglomerate has gradually increased its stakes in Japan’s top five trading companies, with Buffett’s company now holding around 9% of each.
Buffett looking for opportunities outside the U.S.
Buffett’s increasing focus on Japan is part of a broader strategy to capitalize on opportunities outside the United States. In this case, Japan’s trading firms offer the type of value investments he is known for: stable dividends, diversified business models, and access to the global commodity market.
“Berkshire’s yen bond sales this year is the biggest in a year since it started selling yen bonds and this indicates their expectations for upside of Japanese stocks. The market is looking at what kind of stocks will be their next target. Investors see value stocks which pay higher dividends, such as banks and insurers, will be the most likely targets,” said Takehiko Masuzawa, trading head of Phillip Securities Japan.
At the same time, his involvement in Japan has attracted foreign investors, helping the benchmark Nikkei index to rally 18% in 2024.
Impact of Buffett’s cash pile
Meanwhile, it’s worth noting that Buffett has been ramping up cash reserves in recent months. By the end of Q2, the amount was nearing the $280 billion mark.
A key part of this cash pile comes from his sustained offloading of stakes in top companies like Bank of America (NYSE: BAC) and Apple (NASDAQ: AAPL). This record cash pile has sparked speculation regarding Buffett’s outlook on the U.S. stock market.
For instance, Tesla (NASDAQ: TSLA) CEO Elon Musk, among others, has speculated that the ‘Oracle of Omaha’ might be preparing for a possible stock market crash after the November presidential elections.
Finally, it appears Buffett remains bullish on the Asian market despite speculation about his outlook for the United States. At the same time, there is the view that his cash reserve may be part of his historical strategy of sitting on the sidelines, waiting for the perfect investment opportunity to emerge.
