Berkshire Expands Japanese Trading House Investments to Nearly 10% Each

Warren Buffett’s enthusiasm for Japanese equities has deepened, despite his trend of reducing American stock positions.

Berkshire Hathaway, headed by the 94-year-old investment icon, has increased its share in five prominent Japanese trading firms—namely Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo—by over one percentage point, bringing stakes between 8.5% and 9.8%, according to recent filings.

In his annual missive for 2024, famously known as the "Oracle of Omaha," Buffett reiterated Berkshire's enduring commitment to its investments in Japan, noting that the firm has secured arrangements to exceed the initial cap of 10% ownership.

These firms are among Japan’s top trading conglomerates, known as "sogo shosha," known for their investments that span a wide array of sectors both nationally and globally. Buffett remarked that these operations bear a resemblance to Berkshire's own diverse investment strategy. Berkshire commenced its acquisition of these stakes in mid-2019.

A strategic component of these investments includes Buffett’s approach of managing currency fluctuations. This involves selling Japanese bonds and benefiting from the spread between investment dividends and the coupon payments necessary to manage the bond debt.

By the conclusion of 2024, the combined market value of Berkshire’s stakes in these Japanese entities rose to $23.5 billion, bought initially for a total of $13.8 billion. Buffett articulated his admiration for the companies' executives and their adeptness at investor relations and capital allocation.

Buffett revealed his positions in these Japanese companies after strategic accumulations on the Tokyo Stock Exchange, citing his astonishment at the prospects available and his attraction to the companies’ dividend growth trajectories.

In 2023, Buffett, accompanied by Greg Abel, his chosen successor, visited Japan to engage with the leadership of these companies, expressing his aspiration for Berkshire to indefinitely hold these investments.

Following the principles of his mentor, Benjamin Graham, Buffett has been systematically divesting from U.S. equities and enhancing Berkshire's substantial cash reserves, which reached $334 billion. Over the course of 2024, Berkshire sold more than $134 billion in stocks, predominantly by lessening positions in its two largest U.S. equity investments.