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Warren Buffett’s Berkshire Hathaway has decided to increase its holdings in Japan’s top five trading companies after successfully negotiating to lift the previous 10 percent ceiling on investments in these diverse businesses. Whether it’s noodles or natural resources, these companies have a finger in every pie.
Recently, the American investment giant boosted its share in Mitsubishi Corporation, raising its stake from 8.31 percent to 9.67 percent. In Mitsui, the increase was from 8.09 percent to 9.82 percent, as revealed in documents filed with Japan’s securities regulators on Monday. Similar incremental increases were seen in Itochu, Marubeni, and Sumitomo Corporation, each by about a percentage point.
Despite these moves, none of Berkshire’s investments have yet reached the 10 percent limit, an agreement with the trading companies that was “moderately relaxed” last month.
These trading houses play a crucial role in Japan, acting as key importers of essential raw materials like oil, gas, iron ore, and copper. Additionally, they support the country’s export-heavy industries, such as automotive, electronics, and machinery manufacturing.
Buffett first unveiled Berkshire’s stake in these trading houses back in 2020. In his recent annual shareholder letter, he expressed unwavering admiration for these companies, which has only grown over time.
Known as the “Oracle of Omaha,” Buffett laid out plans to keep these investments for “many decades.” He applauded these trading firms for their resemblance to Berkshire’s journey from a textile company to a large-scale investment conglomerate.
Similarly, Japan’s trading companies have secured lasting ownership in various enterprises, ranging from salmon farms to convenience stores, and even medical insurers.
While Berkshire is doubling down on these Japanese entities, it’s also amassing a noteworthy cash reserve, reaching $334.2 billion by the end of last year, following a broader equity sell-off.
Analyst Thanh Ha Pham from Jefferies mentioned that he will be closely analyzing the trading houses’ shareholder return policies when they release their financial results for the full year ending in March.
However, he cautioned that while Buffett’s investments are undoubtedly a boon, there are challenges to contend with. Factors like declining commodity prices, high interest rates, and inflation’s pressure on Japanese consumer spending could pose significant challenges.
