For years, Warren Buffett, regarded by many as one of the most successful investors of all time, has been shaking Japan’s money tree and earning himself a fortune in the process. He has shrewdly taken advantage of the nature of the Japan Stock Market, making his investment decisions based on careful calculations and gut feelings. What is it about Japanese stocks in particular that has proven so attractive and lucrative for Buffett? In this article, we explore the mystery behind his success and discover how he has managed to turn a profit in the world’s third largest economy.
1. The Oracle of Omaha Harvests Japan’s Magic Money Tree
Legendary investor Warren Buffett has his eyes set on Japan as he continues to seek out investments opportunities around the world. Recently, the ‘Oracle of Omaha’ made a move on Japan’s so-called ‘Magic Money Tree’, scooping up stakes in trading firm Itochu and mobile phone operator Softbank. It seems that Buffett had seen the value of these investments despite the country’s long-stagnated economy.
These are two prime examples of playing the long game, a hallmark of Buffett’s investing style. Instead of hunting for short-term gains, he is looking for investments that will slowly yield fruit as the market stewards itself over the long-term. By getting in early on such opportunities, he has the chance of becoming one of the few to benefit from their potential growth. It is this ability to identify hidden potential that has kept him in the top ranks of investors for decades.
- Itochu: Buffett took a 5.2% stake in the trading firm in May, 2019.
- Softbank: Buffett took a 4.5% stake in October 2019.
2. Warren Buffett’s Investment in SoftBank: A Powerful Enticement
As the world’s most successful investor, Warren Buffett has had a remarkable effect in inspiring others to invest, such is his influence and success. Of all his investments, however, his latest investment in SoftBank is arguably the most powerful, and is certainly the most entrancing.
First and foremost, Warren has invested billions in the company. This by itself has made investors sit up and take notice as investing with Warren has provided significant returns for investors in the past. In investing in SoftBank, Warren is also seen to be betting on the potential of tech giants to provide environmental, social and financial sustainability for the future.
- Warren Buffett’s Investment: making it his largest non-US venture to date.
- His Track Record: Known for turning small investments into huge successes.
- Peer Pressure: Effectively leading others to invest through his influence and reputation.
In backing SoftBank and its portfolio of investments, Warren is putting his faith in the future of both the tech companies, and the planet. At the same time, the power of his endorsement is not lost on investors, who are keen to mirror his success by investing alongside him.
3. A Study in Contrasts: Buffett and SoftBank in Context
Competing Financial Strategies
Warren Buffett and SoftBank take two very different approaches to investing. Buffett is known for his “value investing” style, which seeks to purchase undervalued companies that have potential to outperform the market. He believes in taking a long-term, conservative approach to investing, wagering that the returns he makes will be worth the wait. SoftBank, on the other hand, works in a much more aggressive manner. Its focus lies in “growth capital,” meaning they invest large sums of money in companies with high growth potential.
Different Risks and Rewards
The risk-reward dynamic is a key part of both Warren Buffett and SoftBank’s investing strategies. Investing with Buffett is more fruitful in the long-term, as it allows for more consistent returns over a period of time. However, it also involves a certain degree of caution—the wise investor should carefully consider their potential ROI before putting money into a venture. SoftBank, on the other hand, pursues risky investments with high returns, but there is an equally large potential for failure. Depending on one’s appetite for risk, either strategy can be successful. But it’s clear that the two are quite different in terms of their approach, and it’s up to the individual investor to determine which one suits their needs.
4. The Impact of Buffett’s Investment on Japanese Business Culture
The rise of Warren Buffett to a household name across the globe has seen the impact of his investing style become more pervasive in foreign markets too. When considering Japan, Buffett’s investment undoubtedly changed the face of business culture across Japan.
- He Urged Corporations to Reevaluate Their Business Practices: Buffett has always been a vocal proponent of responsible investing and stressed shareholder-value. His foray into the Japanese market emphasized this and he urged corporations to prioritize long-term growth, which significantly changed the traditional Japanese preference for debt-leveraged growth.
- He Demonstrated The Power of Faith in Companies: While Buffett wasn’t the first to invest in Japan– his investments there marked a turning point in how the public treated the nation’s economy. Buffett’s investment was viewed with faith and trust, which led many native investors to also invest with confidence.
Buffett demonstrated that investing in Japan wasn’t only possible, it was profitable. He even closed the books on many transactions with an ‘Abunai’—a Japanese phrase of affirmation which literally translates to ‘no problem!’ This gave people confidence that the Japanese economy was still full of potential, a concept which was fundamental to an eventual cultural shift.
For the foreseeable future, Warren Buffett remains Japan’s most-watched investor. One thing is certain: wherever Buffett goes, the Japanese financial market is sure to follow, shaking the magic money tree along the way. It seems that the unlikely fusion of a long-held cultural tradition and modern investments can work surprisingly well.