Buffett’s 6.5 Score for Your Asia-Heavy Tech and TSMC Portfolio

Pull up a chair. I just poured myself a Cherry Coke, put on my reading glasses, and took a look at this portfolio. I have to tell you, looking at this list of businesses, I feel like I've just raided my late partner Charlie Munger’s nightstand! You have completely bypassed the American tailwind and bet the entire farm across the Pacific.

Now, there is nothing wrong with venturing outside of Omaha to find value—Charlie dragged me kicking and screaming into BYD years ago, and it turned out to be one of our most spectacular investments. But managing a portfolio is about understanding the businesses you own, knowing their intrinsic value, and maintaining a margin of safety. Looking at what you've put together, I see a mix of wonderful businesses with massive competitive moats, sitting right alongside some highly speculative ventures that make my stomach churn more than a bad steak at Gorat's. Let's dig in.

First, let's talk about how you’ve built this collection of businesses. You’ve got a staggering 95% of your money parked in the Asia-Pacific region. As I've said for decades, never bet against America, but I can respect an investor who goes where they believe the value is.

What really catches my eye is your sector breakdown. You've got over 53% of your capital poured into technology, specifically heavily weighted in the semiconductor industry with Taiwan Semiconductor, Samsung, SK Hynix, Tokyo Electron, and MediaTek. I used to joke that I didn't understand technology, but even I know that putting half your net worth into chip foundries is a massive bet on a notoriously cyclical business. However, I applaud your focus on competitive advantages. Over 56% of your portfolio rests in companies with immense scale advantages, and another 20% rely on powerful intangible assets and brands. Buying titans like Toyota and BHP Group shows you understand that a wonderful company at a fair price beats a fair company at a wonderful price. You're buying businesses that actually make things and dig things out of the ground.

Now, we need to talk about your cash reserves. Sitting at just 5.3%, you’re running mighty lean. Cash is king only when you deploy it, but idle money is your dry powder. When Mr. Market gets depressed and starts quoting absurdly low prices for wonderful businesses, you want to be able to back up the truck. Right now, you barely have enough cash to buy a round of Dilly Bars.

When the tide goes out, you see who has been swimming naked. And looking at some of your holdings, I see a few places where you might catch a cold.

🚩 The SoftBank Speculation: You've got 4.2% of your money in SoftBank Group. Masayoshi Son and I have very different ideas about investing. Chasing unproven startups at exorbitant valuations through the Vision Fund is pure speculation. They lack a competitive moat, and in my book, that's just throwing good money after bad. You don't have to swing at every pitch.

🚩 Cyclical Tech Concentration: While companies like TSMC and Samsung have incredible scale, holding five major semiconductor-related companies leaves your portfolio highly vulnerable to the global chip cycle. If demand slows, your portfolio’s earnings will drop like a rock. Diversification is protection against ignorance, and you are dangerously concentrated here.

🚩 The Alibaba Cautionary Tale: You've allocated 5.3% to Alibaba. Charlie Munger bought into this one too, and he later called using leverage to buy it one of his worst mistakes. It's a company with a strong network effect, but you are taking on significant regulatory and geopolitical risks. Make sure you truly have a margin of safety on your purchase price.

🚩 Lack of Geographic Diversification: Putting virtually 100% of your equity into one global region is taking on massive macroeconomic risk. If the Asia-Pacific region catches a financial cold, your entire portfolio goes to the hospital.

I'm going to give this portfolio a 6.5 out of 10. You have an excellent eye for economic moats and you've bought into some truly dominant, world-class businesses like TSMC, Toyota, and BYD. But your heavy concentration in cyclical technology and total lack of geographic diversification leaves you exposed to the elements.

Here is what I would suggest you do:

1. Build up your cash: Try to get that 5.3% cash reserve closer to 10% or 15%. Give yourself the flexibility to act when the market inevitably panics.

2. Trim the speculation: Take a hard look at SoftBank. If you can't calculate its intrinsic value based on predictable future cash flows, you have no business owning it.

3. Broaden your horizons: Consider reallocating some of your semiconductor profits into wonderful businesses in North America or Europe to insulate yourself from regional shocks.

4. Hold the fort: For your core compounders like CBA, BHP, and Toyota, let them do the heavy lifting. Time is the friend of the wonderful company, the enemy of the mediocre.

As Charlie used to tell me, "The big money is not in the buying or the selling, but in the waiting." Make sure you are waiting on the right businesses.