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Warren Buffett buys into Japanese stocks. How to play the move using ETFs

Warren Buffett is buying into Japan.

On his 90th birthday on Sunday, the billionaire chairman and CEO of Berkshire Hathaway said his company had taken 5% stakes in Japan’s five leading trading companies: Mitsubishi Corp.Itochu Corp., Marubeni Corp.Mitsui & Co. and Sumitomo Corp

Berkshire’s plan is to keep the stakes — which equate to a roughly $6 billion bet on Japan’s energy, food, metal and textile industries — as long-term plays with the possibility of increasing each one to as much as 9.9%.

While investors may miss the boat on those five stocks, there are still ways to play Buffett’s bet on Japan using ETFs, market analysts said.

“It’s a nice tell that the Japanese market has been undervalued,” Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA Research, told CNBC’s “ETF Edge” on Monday.

The iShares MSCI Japan ETF (EWJ), the largest Japan-focused ETF on the market by assets, has seen about $3 billion of outflows in the past year, Rosenbluth said, citing CFRA. The WisdomTree Japan Hedged Equity Fund (DXJ) lost about $1 billion in the same time frame, he said.

“Some of this money collectively is going into the BetaBuilders ETF, BBJP, which is a cheaper version of those two products,” he added, referring to JPMorgan’s BetaBuilders Japan ETF. “But we do think that there’s an undervalued opportunity in some of these Japanese ETFs and … you get the benefits of diversification.”

Jay Jacobs, senior vice president and head of research and strategy at Global X ETFs, said there’s much more to Japan’s market than meets the eye.

“A lot of people look at Japan and think of this kind of large, but stagnant economy that hasn’t done a lot in the last 10 or 20 years and that’s actually very far from the truth,” Jacobs said in the same “ETF Edge” interview. “There are pockets of opportunity within Japan where they’ve been very much at the cutting edge.”

Global X has seized on two of those pockets with its Robotics & Artificial Intelligence ETF (BOTZ), 42% of which is invested in Japanese stocks.

“These are leading companies at developing robots that are building automobiles, that are building cellphones, that are manufacturing semiconductors, that are building the robots that are going to be delivering towels at our hotels soon,” Jacobs said. “So, they are at the forefront of one of the most powerful themes that we see in the market today.”


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