Warren Buffett Buys Over Five Percent Shares in Japan's Five Biggest Trading Firms

Berkshire Hathaway Inc said it has acquired slightly more than five percent of the shares in five large Japanese companies, marking a departure for Chairman Warren Buffett as he looks outside the United States to bolster his conglomerate. On Buffett’s 90^th birthday, Berkshire said it acquired its stakes in Itochu Corp, Marubeni Corp, Mitsubishi Corp, Mitsui & Co Ltd and Sumitomo Corp over approximately 12 months.

Berkshire said it intends to hold the investments for the long term, and may boost its stakes to 9.9 percent. A Berkshire insurance business, National Indemnity Co, is holding the shares. “I am delighted to have Berkshire Hathaway participate in the future of Japan,” says Buffett. He adds, “The five major trading companies have many joint ventures throughout the world and are likely to have more. I hope that in the future there may be opportunities of mutual benefit”.

Five 5 percent stakes were worth 655 billion yen ($6.21 billion) as of Friday’s close, Reuters calculation showed based on Refinitiv data. On Monday, shares in the trading houses jumped as much as 11 percent in early Tokyo trade, outperforming a 1.5 percent rise in the broader TOPIX .TOPX share price index. Marubeni was the biggest gainer among the five, surging 12 percent. Sumitomo and Mitsubishi rose more than 10 percent and Mitsui rose 8.2 percent. Itochu – the only one of the four with a price-to-book ratio above 1 – rose 5.4 percent to a record high. Shares of companies often rise when Berkshire discloses new investments, reflecting what investors view as Buffett’s imprimatur.

The Japanese trading companies in many ways appear to be a typical Buffett investment: four of them trade well below book value, meaning their market capitalizations were below their assets. Several also have hefty amounts of cash on hand. Mitsubishi, for instance, has seen steady growth in its free cash flow per share over the last four years, Refinitiv data showed. Further and in a likely attraction for Buffett - who famously avoids investing in companies he claims not to understand – the Japanese trading houses are deeply involved in the real economy: steel, shipping, commodities, and in some cases retail.

“Since Buffett’s portfolio is becoming heavily skewed to Apple, maybe he was looking for something complete the opposite of Apple,” says Hiroki Takashi, Chief Strategist, Monex in Tokyo. Most of Berkshire’s operating businesses are American, though it has acquired a handful of foreign companies including Israel’s IMC International Metalworking and German motorcycle apparel retailer Detlev Louis.

Read More News :

Reliance to Secure Future Group's Units for $3.4 Billion

Cloud4C Associates with Shell ITES to Enhance its Business Process