A Historical Analysis from the Ultimate Financial Encyclopedia
For over half a century, Warren Buffett rarely looked beyond American shores for investment opportunities. From buying his first stock at age 12 to building Berkshire Hathaway into an empire, the Oracle of Omaha built his fortune almost entirely on domestic businesses.
Then, in the wake of 9/11, something changed.
The Federal Reserve slashed interest rates. Easy money flooded the financial system. America's trade deficits expanded ever wider. And Warren Buffett—the most patient, most American of investors—began quietly building positions in China, South Korea, and Europe.
This is the story of how the world's greatest value investor was forced to leave his comfort zone, and what it teaches working-class investors about finding value when your home market runs dry.
The Setup: Too Much Cash, Not Enough Bargains
By 2002, Berkshire Hathaway's cash position had swollen to roughly $40 billion.
This should have been good news. It wasn't.
For a value investor, excess cash sitting idle is a problem, not a blessing. Cash earns next to nothing. Cash doesn't compound. Cash is the "bird in the hand" that Buffett's mentor Benjamin Graham warned against hoarding when better opportunities exist.
But Buffett couldn't find those opportunities in America.
The post-9/11 environment had created a peculiar problem: interest rate cuts had pushed money into assets, inflating prices across the board. Meanwhile, Buffett held a growing concern that would shape the next decade of his investing career:
He believed the U.S. dollar was going to decline in value.
Combine an overpriced domestic market with concerns about currency debasement, and you get a legendary value investor forced to do something he'd almost never done before: look abroad.
PetroChina: The Trade That Changed Everything
The Setup (2002-2003):
The United States was in recession. Oil traded around $20 a barrel—a price that feels almost mythical today. Amid this backdrop, Buffett made his first serious foray into foreign equities: PetroChina.
The Numbers That Made It Irresistible:
PetroChina ADS traded around $15 per share
The company earned approximately $5 per ADS
Buffett was buying at roughly 3 times earnings
The dividend payout exceeded $2 per ADS—a yield above 10%
Let that sink in. A profitable, dividend-paying oil company, trading at a P/E ratio that would make most value investors weep with joy, offering a double-digit dividend yield.
Why Buffett Bought:
The reasoning wasn't complex. It never is with Buffett. It was cheap. Very cheap.
For approximately $500 million, Berkshire acquired 13.3% of the company—a position that would later prove to be one of the most lucrative trades in Buffett's career.
The Result:
Buffett held PetroChina for less than five years. When he sold, Berkshire had netted $3 billion in profit.
The Hidden Currency Play:
Here's what most investors miss about this trade: during Buffett's holding period, the Chinese yuan appreciated roughly 10% against the U.S. dollar.
This means Buffett's PetroChina position delivered a double benefit:
The business itself was undervalued (3x earnings is a gift)
The currency appreciated, adding an extra layer of returns for a dollar-based investor
This wasn't luck. This was Buffett's dollar thesis playing out in real time.
He wasn't just betting on a cheap Chinese oil company. He was betting that holding assets denominated in a strengthening currency would outperform holding cash in a weakening one.
Korea: The Telephone Directory of Bargains
Still sitting on mountains of cash with limited domestic opportunities, Buffett turned his attention to a market almost no American investors were studying: South Korea.
The Method (2004):
According to Alice Schroeder's biography Snowball, Buffett received a book—literally the size of several telephone directories stapled together—containing lists of Korean stocks.
What did he do with this mountain of data?
He did what he'd always done since his 20s poring over Moody's manuals: He read every page, manually, the old-fashioned way.
No algorithms. No screening software. No analyst reports. Just patient, methodical reading until he'd narrowed thousands of companies down to a shortlist that could fit on a single page.
Buffett's Own Words on the Discovery:
He described the experience with genuine enthusiasm, comparing it to finding something new and exciting. These were good companies trading cheap—paradoxically, the stocks had gotten cheaper over five years while the underlying businesses had grown more valuable.
The Business Quality:
These weren't speculative tech stocks or trendy consumer brands. Buffett was looking at:
Steel producers
Cement manufacturers
Flour mills
Electricity utilities
Dairy companies
Boring. Essential. Permanent.
Products people would still need in ten years, regardless of economic cycles or technological disruption.
On Currency Risk (A Lesson in Intellectual Honesty):
Buffett openly admitted he wasn't a currency expert. But his reasoning here reveals the core of value investing philosophy:
Investing always requires accepting some uncertainty about the future. He believed that as a group, these Korean companies would perform well over several years—understanding that some individual picks might disappoint, but the collective portfolio would succeed based on the depth of value he'd uncovered.
The Posco Position:
In 2006, Buffett committed $768 million to acquire 5.1% of Posco, the Korean steel giant.
The current result (as of this writing): Berkshire's profit on this position stands at approximately 70%.
Buffett's Assessment:
He called it simply a great company—and great companies, in his view, become worth more and more over time. This is the essence of buy-and-hold philosophy: identify quality, buy at a discount, let time and compounding do the rest.
The 2007 Validation:
In October 2007—coincidentally right near the market's recent peak—Buffett visited Korea in person. His assessment: the Korean market appeared modestly cheaper than most global markets.
His framework for evaluation was refreshingly simple: price-to-earnings ratios combined with a flourishing economy of over 50 million hardworking people. His timeframe wasn't measured in weeks or months, but in decades—he expected Korea to perform as well as most markets over the next ten years, and possibly better.
The European Expansion: Hunting Elephants Abroad
Having found success in Asia, Buffett's "elephant gun" (his term for large-scale acquisitions) turned toward Europe.
Tesco (2006): The UK Retail Giant
Buffett began accumulating shares of British retail giant Tesco in 2006, steadily increasing his position over time.
The Final Tally: 3.6% ownership stake, representing a total investment of $1.7 billion.
This wasn't a quick trade—it was methodical accumulation, the hallmark of patient capital deployment that defines Berkshire's approach.
Sanofi-Aventis (2011): The Pharmaceutical Bet
Buffett expanded into French pharmaceutical giant Sanofi-Aventis, recognizing the durable moat that comes with patented drugs, extensive distribution networks, and defensive healthcare demand that persists regardless of economic conditions.
Munich Re and Swiss Re: The Insurance Giants
Perhaps most telling of Buffett's European strategy was his move into reinsurance:
$2.8 billion invested for a 10.5% stake in Munich Re
3 billion Swiss Francs injected into Swiss Re
Why insurance companies? This is classic Buffett—he understands insurance economics intimately (Berkshire's own insurance operations, particularly GEICO, form the bedrock of his empire). Reinsurance companies with strong balance sheets and disciplined underwriting represent exactly the kind of "boring but profitable" business model he's always favored.
The Lessons for Investors
Here's where this becomes more than historical trivia. What can the average investor learn from Buffett's global safari?
Lesson 1: Value Doesn't Respect Borders
The Core Principle:
As value investors, we cannot limit our search to the market we're most familiar with. Greater bargains often exist in markets we've never considered.
The Uncomfortable Truth:
How many investors dream of finding a company trading at 3x earnings with a 10%+ dividend yield? PetroChina in 2002 offered exactly that. But almost no American retail investors were looking at Chinese oil companies.
Why? Comfort zone bias. We invest in what we know, what we can easily research, what CNBC talks about.
Buffett's willingness to leave his comfort zone—reading telephone-directory-sized books of Korean stock listings—demonstrates the extra effort required to find truly exceptional value.
Lesson 2: Currency Matters (But Isn't Everything)
Buffett's dollar thesis in the early 2000s wasn't just academic. It shaped real portfolio decisions.
The Framework:
When you believe your home currency will weaken, owning productive assets denominated in stronger currencies provides a natural hedge.
This isn't currency speculation—it's currency awareness.
Buffett wasn't trading forex. He was buying wonderful businesses that happened to be denominated in currencies he expected to strengthen relative to the dollar. The PetroChina trade proved this thesis correct, with the yuan's appreciation adding meaningfully to already-substantial returns.
Lesson 3: Boring Businesses Win
The Pattern Across Every International Investment:
PetroChina: Oil (essential, cyclical, but cheap)
Korean stocks: Steel, cement, flour, electricity, dairy
Posco: Steel manufacturing
Tesco: Grocery retail
Sanofi: Pharmaceuticals
Munich Re/Swiss Re: Insurance
None of these are exciting. None of these are "growth stories" or technological disruptors.
All of these are essential products and services that people will need regardless of economic conditions, technological shifts, or market sentiment.
This is the Buffett/Munger philosophy in action: buy what people will still need in ten years, at prices that don't require heroic assumptions about the future.
Lesson 4: The Data Barrier Is Real (But Surmountable)
The Honest Challenge:
Foreign market data is genuinely harder to access than domestic data. A telephone-directory-sized compilation of Korean stock listings isn't readily available to most individual investors, even those willing to put in the work.
What This Means for You:
You don't need to replicate Buffett's exact process. Few individual investors have the resources to manually screen thousands of foreign securities.
But you can apply the principle: When domestic markets seem expensive or picked-over, expanding your search to international markets—through ADRs (American Depositary Receipts), international index funds, or well-researched foreign stocks—can uncover value that's invisible to home-biased investors.
Lesson 5: Patience Measured in Years, Not Days
Buffett's Own Words Bear Repeating:
When evaluating the Korean market's potential, his timeframe wasn't weeks or months—it was explicitly framed in terms of ten years.
This is the antithesis of modern trading culture.
While financial media obsesses over quarterly earnings and daily price movements, Buffett was making decade-long bets on entire economies and business sectors.
The Practical Application:
If you're going to venture into international value investing, you need Buffett's time horizon. These aren't trades. They're multi-year (or multi-decade) commitments to businesses you believe will compound value regardless of short-term market noise.
The Portfolio Framework: Applying Global Value Investing Today
For the working-class investor building wealth in 2013, here's how to think about Buffett's international lessons:
Step 1: Exhaust Domestic Value First
Before venturing abroad, ensure you've properly analyzed domestic opportunities using the DCF framework and margin-of-safety principles that form the foundation of intelligent investing.
International investing adds complexity (currency risk, foreign regulations, language barriers, information asymmetry). Take on this complexity when domestic value is scarce.
Step 2: Look for the PetroChina Pattern
The Screening Criteria:
P/E ratios in the single digits (3-6x earnings)
Dividend yields exceeding 8-10%
Essential, non-discretionary products or services
Government or state-backed stability (reduces catastrophic risk)
Where to Look:
Emerging markets experiencing temporary pessimism, currency devaluation fears, or geopolitical uncertainty often create exactly these conditions—cheap valuations on otherwise sound businesses.
Step 3: Consider Currency as a Feature, Not a Bug
If you hold a thesis that the U.S. dollar may weaken over your investment timeframe, allocating a portion of your portfolio to businesses denominated in stronger currencies provides a natural hedge.
Recognizing where you hold assets matters as much as what assets you hold.
Step 4: Access International Markets Practically
For most working-class investors, replicating Buffett's direct stock-picking approach in foreign markets isn't practical. Consider:
ADRs (American Depositary Receipts): Foreign companies that trade on U.S. exchanges (like PetroChina did)
International index funds: Broad exposure to developed or emerging markets
ADR-focused research: Companies like Tesco, Sanofi, and other multinational giants often have ADRs accessible to everyday investors
The Uncomfortable Question: Are We Too Comfortable at Home?
Here's the challenge this history presents to every American investor:
If Warren Buffett — with virtually unlimited resources, a team of analysts, and six decades of investing experience — found it necessary to venture into Chinese oil companies, Korean steel makers, and European retailers to find value...
What does that say about the depth of opportunity remaining in an increasingly efficient, well-covered American market?
The lesson isn't that domestic investing is dead. Buffett still holds massive American positions and continues finding value at home.
The lesson is that limiting your search exclusively to familiar territory — your home country, your home currency, your home market— may mean leaving substantial value on the table.
Conclusion: The Elephant Hunter's Legacy
Warren Buffett spent the first 50+ years of his investing career almost exclusively focused on American businesses. Then, faced with excess cash, a weakening dollar thesis, and a scarcity of domestic bargains, he did what all great value investors must eventually do:
He followed the value, wherever it led.
From a Chinese oil company trading at 3x earnings, to Korean industrials hidden in telephone-directory-sized stock manuals, to European retailers and reinsurance giants — Buffett proved that the principles of value investing transcend borders, currencies, and cultures.
The core lesson for investors building wealth today:
Don't limit yourself to what's comfortable. Don't assume the best opportunities only exist in markets you already understand. Sometimes, the greatest bargains require picking up an unfamiliar book, studying an unfamiliar market, and having the patience to hold for years while others chase quarterly headlines.
Buffett found his "new girl" in Korean stock listings. Where will you find yours?
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Build your fortress wherever value takes you.
