Japanese trading house shares surge after latest Warren Buffett endorsement

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Shares in Japan’s five largest trading houses surged as much as 9 per cent on Tuesday after Warren Buffett signalled Berkshire Hathaway was likely to increase its already substantial stakes in the companies at the heart of Japanese industry.

The five stocks rose between 4 and 9 per cent in morning trading in Tokyo after Berkshire at the weekend revealed its intention to increase ownership and hold the stakes for “many decades”. Markets in Japan were closed on Monday for a public holiday.

Mitsubishi Corporation was up about 9 per cent, while Mitsui, Marubeni, Sumitomo and Itochu all rose by more than 4 per cent.

Berkshire disclosed in 2020 it had made a 5 per cent investment in each of the trading houses, for a combined total of more than $6bn, and subsequently added to the stakes.

The market value of those holdings have soared to $23.5bn versus the cost of $13.8bn to acquire them.

Buffett told shareholders in his annual letter on Saturday that Berkshire had agreed with the five trading houses to relax a ceiling capping its investment at 10 per cent.

“Over time, you will likely see Berkshire’s ownership of all five increase somewhat,” he wrote.

The five companies have broadened their activities from commodities trading to hold highly diversified portfolios including convenience store chains, salmon farms, infrastructure and technology start-ups. Each trading house has hundreds of companies in its portfolio, up to 1,300 for some.

“These guys are like the private equity of Japan” with a longer investment horizon, said Thanh Ha Pham, analyst at Jefferies.

Buffett’s signal to increase investment in the trading houses comes as a decade of corporate governance reforms and the return of inflation after three decades of flat or falling prices have attracted global investors to Japan.

In his letter, Buffett highlighted $812mn of dividends expected from Berkshire’s trading house stakes in 2025, underscoring the greater focus by Japanese management teams on investor returns.

Marubeni on Tuesday said Berkshire’s interest was “proof that the trading company sector, including our company, is highly valued”.

The trading houses remain the only Japanese sector in which Berkshire has invested despite speculation that it might expand the scope of its portfolio in the country.

Investors have suggested that Berkshire might use its stakes in the trading houses to gain access to dealmaking in infrastructure and energy, areas in which the US company has significant global interests.

Mitsubishi said it was in “continuous discussion” with Berkshire on collaborations, including joint investments.

Pledges to increase Japanese investment in the US and boost purchases of US gas were a key outcome of a recent meeting between Japanese Prime Minister Shigeru Ishiba and US President Donald Trump.

“Japan needs energy from the US and the US needs financial and technical support from Japan,” said Pham.

“I would see the trading houses being at the centre of this,” he added, noting that Berkshire also liked the flexibility of the trading houses to exit dying industries and pivot to high-growth sectors.

“The business model makes a lot of sense and we’re seeing a huge amount of [foreign direct investment] into Japan,” said Pham. “The geopolitics is changing and these guys will benefit from this.”