Warren Buffett places $ 6 billion bet on Japanese trading houses
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Warren Buffett placed a $ 6 billion countercurrent bet on Japan’s five largest trading houses, the century-old commodities specialists who are increasingly turning into global venture and private equity firms. investment.
Mr Buffett’s move follows an unprecedented $ 132 billion exodus of foreign investment from Japanese stocks over the past 32 months amid waning optimism over Prime Minister Shinzo Abe’s economic agenda . This makes his investment firm Berkshire Hathaway a major shareholder of Mitsubishi Corp, Mitsui & Co, Itochu Corp, Sumitomo Corp and Marubeni Corp.
Investment in Japan also marks a breakthrough beyond familiarity with its home market in the United States, where tech stocks have reached record highs but other industrial investments have suffered heavy setbacks due to the pandemic. of Covid-19.
Berkshire Hathaway, through its subsidiary National Indemnity, holds a stake of more than 5% in each of the five sogo shosha, or general trading houses, according to Japanese regulatory files submitted Monday. The stakes, acquired in the past 12 months, were worth nearly 670 billion yen ($ 6.3 billion) combined as of August 24, according to the filings.
The group said it could increase its stakes to 9.9% in one of five trading houses – whose shares fell sharply during the pandemic – and plans to hold the investments for the long term.
“The top five trading companies have many joint ventures around the world and are likely to have more of these partnerships. I hope that in the future there may be opportunities for mutual benefit, ”Mr. Buffett said in a statement Sunday evening.
On Monday in Tokyo, shares of Marubeni rose 14%, while Sumitomo gained 11%, Mitsubishi 10%, Mitsui 8.7% and Itochu 6%.
Mitsui and Sumitomo confirmed Berkshire Hathaway’s investment but declined to comment further. Mitsubishi said it would help improve the value of the company. Itochu described the investment as “positive news” and a potential catalyst to revitalize the trading house industry. Marubeni declined to comment.
Mr Buffett made his first visit to Japan in 2011, eight months after the Tohoku region was devastated by a massive earthquake. The tour sparked speculation that the founder of Berkshire Hathaway, famous for his preference for high-value stocks, had spotted opportunities in a heavily discounted Japanese stock market.
Although Mr Buffett did not immediately make the large investments many were expecting, speculation over his interest in Japan flared up again last September when his company raised around $ 4 billion in the largest direct bond issue. never denominated in yen by a non-Japanese institution.
“If Mr. Buffett went back to his own fundamentals, Japan would be a very obvious and compelling place to do it,” John Seagrim, Japanese equity broker at CLSA, said at the time of the bond issue.
Berkshire Hathaway said it has 625.5 billion yen of yen-denominated bonds outstanding, maturing on dates starting in 2023 and ending in 2060.
Jefferies analyst Thanh Ha Pham said that while Japanese trading houses would face challenges from the pandemic, in the longer term, each had hundreds of subsidiaries and affiliates in all industries whose operations were essential to the functioning of the economy.
He said Mr Buffett was likely making his investment in the top five trading houses as a result of an intrinsic value calculation, but also because he saw little qualitative difference between them.
“If you go back to 2003, then there was a perception that we didn’t need business houses anymore because e-commerce would come along and everyone would function because of it. Business houses were written like dinosaurs, but here they are: still here and making money. They tend to grow as businesses and they do it well, ”said Pham.