Where is Warren Buffett looking for growth stocks right now?

You may be surprised where the world's most revered value investor has recently gone hunting for investments.

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Key points

  • Warren Buffett increased Berkshire’s stake in five Japanese trading houses in April
  • The Oracle of Omaha thought they were selling for a "ridiculous price"
  • Buffett may believe there are numerous companies in Japan with growth potential

Warren Buffett – CEO of the US$692 billion Berkshire Hathaway ­– is best known as a value investor.

In fact, in a recent Bloomberg investor survey, the majority of respondents said his biggest legacy will be, "Buying stocks for less than what they are worth."

The Oracle of Omaha is also a famously long-term investor, steers clear of stocks he doesn't understand, and looks for companies with big 'moats', or barriers to entry.

Atop his success in steering Berkshire Hathaway alongside his right-hand man Charlie Munger, Warren Buffett's investing philosophy has also helped net him a personal fortune of more than US$100 billion.

And he's not done yet.

Where to for growth?

As The Motley Fool reported on 12 April, Buffett recently increased Berkshire's holdings in five Japanese trading houses: Itochu Corp, Marubeni Corp, Mitsubishi Corp, Mitsui & Co, and Sumitomo Corp.

Trading houses are what conglomerates that trade across a wide range of products are called in Japan.

Berkshire initially acquired just over 5% of each of the five corporations back in 2020.

"They were selling at what I thought was a ridiculous price. Particularly the price compared to the interest rates prevailing at that time," Warren Buffett recently said of the 2020 acquisitions.

At the time, he commented:

I am delighted to have Berkshire Hathaway participate in the future of Japan and the five companies. The five major trading companies have many joint ventures throughout the world and are likely to have more of these partnerships. I hope that in the future there may be opportunities of mutual benefit.

Last month, Berkshire increased its stake in each of the five Japanese trading houses to 7.4%.

Buffett met with a range of top Japanese business leaders when he was in Tokyo.

Citing people with knowledge of the talks, Bloomberg reports the Japanese executives wanted the Oracle's advice and help on how to speed up their transition from commodities.

He asked a lot of questions and was said to be eager to find ways to work with them.

But the big question is, why is Warren Buffett increasing his investments in Japan right now?

According to Fast Retailing founder Tadashi Yanai, worth a cool US$36 billion himself, "It's probably the influence of the weak yen."

Yanai added:

And he may think there are many companies in Japan with growth potential. The trading houses could be a guide to Japanese companies. They could be a guide to the Japanese market in that they can contact all these firms.

How can ASX investors mimic Warren Buffett?

If you want to limit your investments to the ASX, you won't be able to buy shares in the five trading houses Warren Buffett just poured more money into.

But there is a way to gain direct exposure to the Japanese stock market via an ASX-listed exchange-traded fund (ETF).

Namely the iShares MSCI Japan ETF (ASX: IJP). IJP, according to the company's website, provides investors with targeted access to some 85% of the Japanese stock market.

While only making up a small percentage of IJP's total holdings, all five of the Japanese conglomerates Warren Buffett looks to be targeting for growth are held by the ASX ETF.

The IJP share price is up 9% so far in 2023.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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