Mint Primer | Warren Buffett says konnichiwa to Japan: Why?

What is Buffett’s latest move in Japan?

The billionaire-led Berkshire Hathway earlier this week disclosed it had increased its shareholding in Japan’s five biggest trading houses. The Omaha-based conglomerate hiked its stake in Mitsui to 9.82%, in Mitsubishi to 9.67%, in Itochu to 8.53%, in Marubeni to 9.3% and in Sumitomo to 9.29%. The stake increases ranged from 1 to 1.73 percentage points. Berkshire’s Japanese holdings were valued at $23.5 billion at the end of 2024, compared with their aggregate cost of $13.8 billion. Berkshire first bought into the Japanese majors in July 2019, followed by stake hikes in 2020 and 2023.

What do these Japanese firms do?

These five industrial powerhouses are among Japan’s oldest and biggest sogo shosha, or general trading houses which trade in a wide range of goods and commodities, from electronics, hardware, textiles, and automobiles to oil and gas, metals, minerals, and even noodles. They are also engaged in financial services, specialty chemicals, infrastructure and other vital industries. While these conglomerates have a strong focus on serving the domestic market, they are also responsible for a chunk of the country’s exports, and are key parts of the global supply chain in multiple sectors.

Is it all to do with Japan’s economic performance?

Japan has underperformed since the 1990s. The world’s fourth-largest economy grew at an annualized pace of 2.2% during Oct-Dec 2024, and analysts say Trump’s tariffs will bring fresh headwinds. But Buffett has said in the past, his investments are based on a company’s fundamentals, and should not be construed as macroeconomic endorsements.

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What influenced his decision?

In his annual letter to shareholders in February, Buffett declared his intention to increase Berkshire’s stake in the companies and hold them for the “very long term”. He said he admired their financial performance, capital deployment, managements and attitude to investors. “Each of the five companies increase dividends when appropriate, they repurchase their shares when it is sensible to do so, and their top managers are far less aggressive in their compensation programs than their US counterparts,” he said.

What are the lessons for investors?

Buffett retains a laser sharp focus on the basics, ignoring hype. While the rest of the world is going ga-ga over artificial intelligence and other new-age technologies, the investing legend is coolly increasing his stake in robust cash-flow-generating businesses with diversified revenue streams, high operational benchmarks and a track record of corporate governance. Investing styles can fade in and out of fashion, but old- fashioned value investing is evergreen. At least till Buffett is around.