Warren Buffett's Successor, Greg Abel, Now Has $46 Billion of Berkshire Hathaway's Capital Devoted to His Top Investment Idea

Warren Buffett retired as CEO on Dec. 31, 2025 and Greg Abel succeeded him, taking day-to-day oversight of Berkshire’s $316B investment portfolio. Abel has allocated roughly $46B (≈15% of the portfolio) to Japanese equities — stakes include Mitsubishi $13.27B, Mitsui $11.69B, Itochu $8.62B, Marubeni $5.74B, Sumitomo $4.23B, plus a Tokio Marine position initiated at $1.8B now worth about $2.2B. The piece stresses drivers of Abel’s strategy (robust buybacks/dividends, modest executive pay, and low single- to low-double-digit P/Es) and notes Berkshire/ Buffett-approved share buybacks of $78B since July 2018, implying material capital reallocation that could move the named Japanese stocks and related flows.

Analysis

Abel’s Japan-heavy capital allocation is a structural shift in where large, patient pools of capital find “cheap” cashflows; the second-order effect is not just higher multiples for select Tokyo names but also an inflow-induced tightening of the JPY risk premium that will amplify reported USD returns if sustained. That creates a feedback loop: as foreign ownership rises, governance and buyback signal failures become higher-impact events because they change the marginal buyer base and FX sensitivity of realized returns.

Key tail risks live in FX, policy and crowding rather than corporate fundamentals alone. A sudden BOJ tightening or sustained JPY appreciation would flip currency gains into valuation headwinds for foreign holders; conversely, any BoJ easing reversal or regulatory limits on foreign ownership are sub-12-month catalysts that could reprice these exposures sharply.

From a portfolio-construction lens, this is a classic diminishing-marginal-return problem: the earliest purchases earned a stealth “premium for attention” as managements responded; subsequent scale increases face both higher entry multiples and liquidity constraints. That argues for staged exposure, explicit FX hedges, and financing longs via short-duration, high-volatility growth shorts rather than outright cash shorts — you capture rotation optionality while limiting portfolio drawdown if AI/tech sentiment re-accelerates.

Key Decisions for Investors

• Buy BRKB (or BRKA on tax/structure preference) with a 12–36 month horizon: initiate a 3–4% position sized to portfolio with a hard stop at -18% and a target +25–35% if capital-return signaling continues and Japan-positioning drives re-rating. Rationale: optionality to capital allocation upside with lower downside volatility versus unhedged equities.
• Pair trade — long selective Japanese trading-houses ADRs (e.g., MITSY/MTSUY equivalents) vs short NVDA (or buy NVDA-protective puts) over 6–18 months: size 1:1 notional. Thesis: rotation from high-multiple AI winners into cash-flowing, buyback-rich exporters; expect 15–30% relative outperformance if US multiple compression or Japan re-rating occurs; risk is continued NVDA leadership (limit loss to 20%).
• Options-structured hedge: buy BRKB Jan-2028 LEAP calls (to capture long re-rating) financed by selling 3–6 month out-of-the-money calls on high-vol growth names (e.g., NVDA short calls) — roll every quarter. This funds long-duration exposure while extracting premium from short-term tech vol; downside: persistent tech rallies inflate roll costs.
• When accumulating Japanese equities, actively hedge FX: buy JPY call options or enter modest USD/JPY forward sells sized to 50–70% of equity exposure for 6–24 months. This converts a majority of gross local-currency gains into USD-protected outcomes and limits a single-event JPY shock from eroding realized returns.