Recently, Berkshire Hathaway held its annual meeting in Omaha, Nebraska. Warren Buffett told the crowd he’s stepping away from the CEO role at the end of this year.
He’s going out on top of his game. The conglomerate’s stock hit an all-time high last week. His investing acumen is above reproach. Buffett has long focused on domestic equities, but dabbled in international markets as well. That includes Japan, where Berkshire has been a shareholder of financial services firms ITOCHU, Marubeni, Mitsubishi, Mitsui, and Sumitomo since 2019.
That quintet resides in various U.S.-listed ETFs. And that includes the WisdomTree Japan Hedged Equity ETF (DXJ ). Even against the backdrop of a weaker dollar this year, the currency-hedged DXJ has eked a positive performance. Regarding using the ETF as proxy on Buffett’s Japan bets, DXJ answers the call, because four of the five stocks reside among the fund’s top 11 holdings. And all five rank among the top 17.
DXJ Financial Holdings Mirror Berkshire
In his latest letter to investors, Buffett said the five Japanese financial services stocks Berkshire owns “operate in a manner somewhat similar to Berkshire itself.” That pays high praise to the quintet that looms large in the DXJ portfolio. He’s long-term bullish on the five DXJ components, even floating the idea of Berkshire potentially boosting its stakes in the firms.
“Our holdings of the five are for the very long term, and we are committed to supporting their boards of directors. From the start, we also agreed to keep Berkshire’s holdings below 10% of each company’s shares,” Buffett wrote. “But, as we approached this limit, the five companies agreed to moderately relax the ceiling. Over time, you will likely see Berkshire’s ownership of all five increase somewhat.”
Berkshire itself doesn’t pay a dividend. But many of its equity holdings, including several of its largest, aren’t just dividend-paying stocks. They’re dividend growth stocks. In recent years, the theme of elevated shareholder rewards — buybacks and dividends — has taken hold in Japan.
That’s benefited the market at large as well as ETFs like DXJ. Should Buffett’s prediction prove accurate, there’s more dividend growth on the way for the five Japanese financial stocks he and DXJ hold.
Observations From the Oracle of Omaha
“Each of the five companies increase dividends when appropriate, they repurchase their shares when it is sensible to do so, and their top managers are far less aggressive in their compensation programs than their U.S. counterparts,” observed the Oracle of Omaha.
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