Billionaire investor Warren Buffett has chosen Japan’s five biggest trading houses to invest $6bn. These conglomerates have arrange of businesses in everything – ranging from importing food and textiles to the technology and manufacturing industries.
Analysts view this move by the investor as a means to diversify his investments outside of he United States.
Following this move by the 90 year old investor which surprised the market, Buffet is now one of the biggest shareholders in companies like Mitsubishi Corp, Mitsui & Co, Itochu Corp, Sumitomo Corp and Marubeni Corp.
A 5% stake in each of the “sogo shosha”, or general trading companies, has been acquired by Buffett’s investment company, Berkshire Hathaway. These Japanese companies have a key role in the Japanese economy and have started to become global players as well.
“The five major trading companies have many joint ventures throughout the world and are likely to have more of these partnerships,” Buffett said. “I hope that in the future there may be opportunities of mutual benefit.”
The stakes of in the Japanese firms were bought through the subsidiary National Indemnity and combined have a total worth of more than $6.3bn. The strategy of Berkshire is to remain a key investor in these companies for the long term and possibly also increasing its stocks in one or more of the five trading houses. It should be noted that the stocks of the companies have dropped by an average of about 9.9 per cent because of the pandemic. Berkshire has build up its stakes in these firms over the past year through regular purchases of the shares of the company on the Tokyo stock exchange. But the company disclosed this only now.
The Japanese market reacted positively to the news as investors pushed stock of the five trading companies up by between 6 per cent in Itochu and 14 per cent in Marubeni.
Some analysts however are surprised by this move of Buffett because these trading houses have historically not been considered winning investments.
“Their cheap valuation may have been an attraction,” said Norihiro Fujito, the chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “But it is un-Buffett-like to buy into all five companies rather than selecting a few.”
The Japanese economy has been struggling of late which makes it an attractive target for investors who are looking out for some cheap stocks. Reports that speculated Buffett’s interest in the Japanese market have been making the rounds since September after Berkshire Hathaway raised $4bn in a yen bond issue which as the largest ever by a non-Japanese institution.
It had 625.5bn yen of yen-denominated bonds outstanding, Berkshire Hathaway said.
Thee dependence of Berkshire Hathaway on the US economy will be reduced by this investment. The US economy contracted by its highest in at least 73 years in the latest ended quarter.
More than 90 businesses are completely owned by Berkshire Hathaway while having sizable investments in dozens more. Most of those companies are US based and range from American Express and Coca-Cola to Bank of America. Berkshire Hathaway also owns a $125bn stake in Apple.
(Adapted from TheGuardian.com)