Shares of Japan’s top trading houses soared on Tuesday after Warren Buffett’s Berkshire Hathaway Inc. signaled plans to moderately raise its holdings in the sector.
The announcement was widely seen as a vote of confidence in companies like Mitsubishi Corp. and Marubeni Corp., which have gained global prominence for their diversified business models.
Mitsubishi surged 9.2% in Tokyo trading, heading for its biggest single-day gain in a year.
Marubeni jumped 8%, while Mitsui & Co., Itochu Corp., and Sumitomo Corp. also saw their strongest rallies since August.
The broader Topix index, however, slipped 0.2%.
Buffett’s long-term bet on Japan’s trading giants
Berkshire Hathaway initially invested in Japan’s five major trading houses in 2020, pledging at the time to keep its stake below 10%.
In his annual investor letter dated February 22, Buffett revealed that the firms had agreed to slightly relax that cap, allowing Berkshire to increase its ownership.
Analysts view Buffett’s move as a calculated bet on Japan’s trading houses, which engage in a vast range of businesses, from energy and commodities to retail and finance.
The sector’s diversification is seen as a safeguard against market volatility, particularly in a time of global economic uncertainty.
“Trading houses are trading well below their peak, so Buffett probably sees this as a chance to buy more,” said Norikazu Shimizu, an analyst at IwaiCosmo Securities Co.
“With Trump’s presidency and changes in tariff policies, the market outlook is uncertain, but these companies have a broad enough footprint to remain stable.”
Trading firms welcome Berkshire’s deepening involvement
Marubeni responded positively to Buffett’s interest, stating that his investment reaffirmed the strong valuation of Japan’s trading companies.
Buffett’s interest “is proof that the trading company sector, including our company, is highly valued,” Marubeni said in an emailed statement to Bloomberg.
Itochu, meanwhile, disclosed ongoing discussions with Berkshire about potential collaborations involving its subsidiaries, such as Duracell and Fruit of the Loom.
Buffett has previously praised Japan’s trading houses for their shareholder-friendly policies, including responsible dividend increases and stock buybacks.
He also noted their conservative approach to executive compensation compared to US firms.
“Over time, you will likely see Berkshire’s ownership of all five increase somewhat,” the veteran investor said.
“Our holdings of the five are for the very long term, and we are committed to supporting their boards of directors.”
A key metric of trading houses on the Topix index currently trades at about 10 times estimated earnings, compared to 14.5 times for the broader Topix.
Buffett’s continued investment suggests he sees long-term value in the sector despite these lower valuations.
Speculation mounts over Berkshire Hathaway’s next moves
Buffett’s deepening interest in Japan’s trading firms has fueled speculation over his next financial maneuver.
In October, Berkshire issued its largest-ever yen-denominated bond since it began borrowing in Japanese currency in 2019.
With yen notes maturing in April, investors are closely watching how the company will deploy its capital in the region.
Mitsubishi and Mitsui both confirmed they are in discussions with Berkshire over potential joint investments.
Analysts suggest Buffett’s involvement will provide a sense of security for investors and could serve as a catalyst for further growth in Japan’s trading sector.
“This is a tailwind for trading company stocks as a whole, and it seems likely to lead to a certain sense of security for investors,” said Hideyuki Ishiguro, chief strategist at Nomura Asset Management.
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