Should You Follow Warren Buffett & Buy Japan ETFs?

Video Length: 00:09:25

Legendary investor Warren Buffett revealed on his 90th birthday that Berkshire Hathaway (BRK-B - Free Report) has invested $6 billion in Japan’s five biggest trading houses--Mitsubishi, Mitsui, Sumitomo, Itochu and Marubeni. These are giant conglomerates involved in various businesses like technology, manufacturing, convenience-store chain, energy and mining.

The “Oracle of Omaha” said these stakes are a little more than 5% each currently which may be increased up to 9.9%. Berkshire, which plans to hold these investments for the long term, had planned these investments smartly. These were funded through yen-denominated bonds that carry a weighted average interest rate of 0.67 % per FT,  and these companies have an average dividend yield of over 4%.

A change in leadership from Shinjo Abe to Yoshihide Suga, and the possibility of snap elections have also resulted in increased interest in Japanese stocks, which are very attractive in terms of valuations.

The Franklin FTSE Japan ETF (FLJP - Free Report) charges just 9 basis points, whereas the most popular Japan focused ETF –the iShares MSCI Japan ETF (EWJ - Free Report) —has an expense ratio of 49 basis points. The JPMorgan BetaBuilders Japan ETF (BBJP - Free Report) charges 0.19%.

All three ETFs track market-cap-weighted indexes and provide similar exposure. Toyota Motors (TM - Free Report) , Sony (SNE - Free Report) and SoftBank (SFTBY - Free Report) are among the top holdings in these funds.

The WisdomTree Japan Hedged Equity Fund (DXJ - Free Report) holds export oriented Japanese companies which benefit from a weaker yen. It hedges out the currency risk and is worth a look in case the yen moves lower.

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