On Tuesday, February 25th, the stock prices of Japan’s five major trading companies soared on the Tokyo Stock Exchange by 4.7% to 8.8%. The reason behind this surge was the anticipation by the renowned “Oracle of Omaha,” billionaire investor Warren Buffett, that his conglomerate Berkshire Hathaway may increase its holdings in these companies.
As a result of this news, Mitsubishi Corp. saw an 8.8% spike in its stock price, while Mitsui & Co., Sumitomo, Itochu, and Marubeni experienced increases ranging from 4.7% to 7.5%. Meanwhile, the Nikkei average index fell by 1.4% during the same period. The Japanese market was closed on Monday due to a public holiday.
In his annual shareholder letter released last Saturday, February 22nd, Buffett wrote, “As time goes by, you may see Berkshire slightly increase its ownership in these five (trading companies).”
Berkshire Hathaway started investing in these five trading companies in 2019 and disclosed holding 5% stakes in each company by August 31, 2020, with a total value exceeding $6 billion. Subsequently, the market values of these five companies have significantly risen.
As of the end of last year, the total market value of these holdings reached $23.5 billion. Earlier, Buffett had agreements with these Japanese companies to limit his ownership stakes in each to below 10%.
In his shareholder letter last week, Buffett stated, “But as we approach that limit, the five companies have agreed to relax the ceiling moderately.”
Buffett emphasized that this is a “very long-term holding” and pledged support for the boards of these companies.
The business scope of these five trading companies spans various fields from commodities to tech startups.
The 94-year-old Buffett mentioned in the shareholder letter, “I expect that Greg and his eventual successor will hold this Japanese position over the next decades, and Berkshire will find other ways to have productive relationships with these five companies.”
Buffett has designated Greg Abel, the Vice Chairman of Berkshire Hathaway, as his successor.
Market analysts suggest that Buffett’s move may have been motivated by the recent downturn in the trading companies’ stock prices. Since mid-2024, companies like Mitsubishi and Mitsui saw their stock prices fall due to the impact of the Chinese economic slowdown and declining energy prices.
Masayuki Kubota, Director and Chief Strategist at Rakuten Securities Economic Research Institute, noted that these companies have diversified businesses, ranging from liquefied natural gas to convenience stores, and their investment decision-making aligns with Berkshire’s style. Furthermore, the growth in energy demand from artificial intelligence data centers might bring new opportunities for the trading companies.
(This article was referenced from relevant reports in the Financial Times and Nikkei Asia)