Mint Explainer: Warren Buffett’s record cash reserve and his unique Japan strategy

Subscribe to enjoy similar stories. Annual reports are generally not known to be candid. It’s a different story when you’re reading Warren Buffett’s annual letter to shareholders of his company Berkshire Hathaway.

The billionaire investor mentioned the word ‘mistake’ 16 times in the last four letters—remarkable for a corporate leader, as admissions of error are often avoided in big companies. “Sometimes I’ve made mistakes in assessing the future economics of a business I’ve purchased for Berkshire – each a case of capital allocation gone wrong. That happens with both judgments about marketable equities – we view these as partial ownership of businesses – and the 100% acquisitions of companies," he wrote in his letter to shareholders on 22 February.

In this article, Mint delves into two major portfolio moves Buffett has made at Berkshire over the past year: increasing his cash pile and investing in Japanese stocks. Along the way, we have included insights from Rajeev Thakkar, chief investment officer of Parag Parikh Mutual Fund, who has closely studied Buffett's investment strategies for years. Berkshire's portfolio can be broadly divided into three buckets: - The first bucket has 189 subsidiary companies in which they have full control.

It’s difficult to put an exact valuation on these companies since prices are not quoted in the exchange. - The second bucket has marketable securities, in other words, stocks of big companies. Berkshire doesn’t control these companies but views them as part ownership through shares.

This bucket attracts the most attention. - The third basket is cash, which also includes short-term treasury bills. Since Berkshire runs a large insurance business, it said it will always maintain a portion of