Warren Buffett’s Endorsement Boosts Japanese Trading Firms
Shares of Japanese trading houses, including Mitsubishi Corp. (8058.T, MSBHF) and Marubeni Corp. (8002.T, MARUY), surged on Tuesday following Berkshire Hathaway Inc.’s (BRK-B, BRK-A) announcement that it plans to increase its holdings in the sector. The move is widely seen as a strong endorsement from Warren Buffett, signaling confidence in Japan’s diversified trading firms amid global economic uncertainties.
Berkshire Hathaway, which first invested in Japan’s five major trading houses in 2020, had initially agreed to keep its stake below 10%. However, Buffett revealed in his latest annual investor letter on February 22, 2025, that the trading firms have agreed to moderately relax this limit, allowing Berkshire to increase its investment further.
This news triggered a sharp rally in Japanese trading firms, with Mitsubishi climbing 9.2%, Marubeni gaining 8%, and other major players such as Mitsui & Co. (8031.T, MITSY), Itochu Corp. (8001.T, ITOCY), and Sumitomo Corp. (8053.T, SSUMY) experiencing their biggest gains since August 2024.
Market Reaction: Trading Houses Outperform Broader Index
While Japanese trading house stocks soared, the broader Topix index slipped 0.2%, reflecting investor confidence in these firms amid economic volatility.
- Mitsubishi Corporation (8058.T) surged 8.76%, closing at 2,589 yen.
- Marubeni Corp. (8002.T) jumped 8%, reaching its highest level in months.
- Mitsui & Co., Itochu, and Sumitomo Corp. also saw strong gains.
According to Norikazu Shimizu, an analyst at IwaiCosmo Securities Co., Buffett’s move suggests that he sees an opportunity to buy undervalued trading firms at a time when market uncertainty—especially due to potential tariff changes under President Trump’s administration—is rising.
“Trading houses are trading at well below their peak now, so Buffett probably sees this as a chance to buy more,” Shimizu said.
Why Buffett Is Increasing His Stake in Japanese Trading Houses
Japanese trading firms operate highly diversified businesses, spanning sectors like:
- Oil and gas production
- Metals and commodities trading
- Salmon farming
- Retail and consumer goods
- TV shopping and logistics
This diversification makes them resilient to commodity price fluctuations, giving them a stronger defensive position in uncertain markets.
Since Buffett’s initial investment in 2020, these firms have significantly outpaced the Nikkei 225, reflecting strong operational performance and shareholder-friendly policies.
Buffett also praised Japan’s trading firms for their approach to:
- Increasing dividends when appropriate
- Conducting share buybacks when it makes financial sense
- Maintaining reasonable executive compensation levels compared to U.S. firms
This long-term shareholder value strategy aligns with Buffett’s investment philosophy, making Japanese trading houses an attractive bet for Berkshire Hathaway.
Berkshire and Japanese Firms Exploring Collaborations
Beyond financial investments, Buffett’s conglomerate is actively discussing business partnerships with Japanese trading firms.
For instance, Itochu Corp. confirmed it is in talks with Berkshire Hathaway regarding potential collaborations, particularly involving brands like:
- Duracell (battery brand owned by Berkshire Hathaway)
- Fruit of the Loom (retail and apparel subsidiary of Berkshire Hathaway)
While details remain undisclosed, such strategic collaborations could unlock new revenue opportunities for both Berkshire and Japanese firms.
Valuation and Growth Potential
Despite their strong performance, Japanese trading houses remain attractively valued compared to global peers.
- The Topix trading house index trades at about 10 times estimated earnings, compared to 14.5 times for the broader Topix index.
- This suggests room for further upside, especially as Buffett’s involvement signals long-term growth potential.
Marubeni, in an emailed statement, emphasized that Buffett’s increased investment validates the sector’s strength:
“Buffett’s interest is proof that the trading company sector, including our company, is highly valued.”
Conclusion: Buffett’s Bet Reinforces Confidence in Japanese Trading Houses
Berkshire Hathaway’s decision to expand its investment in Japanese trading firms underscores their resilience, attractive valuations, and long-term growth potential.
- Japanese trading houses have surged in value, outperforming broader market indices.
- Berkshire Hathaway’s increased stake serves as a strong endorsement, reinforcing investor confidence.
- Strategic collaborations with Berkshire-owned companies could open new business opportunities.
- Valuations remain attractive, suggesting potential for further gains.
As global economic uncertainties persist, Buffett’s move signals that Japan’s trading firms are well-positioned to weather market fluctuations while continuing to deliver shareholder value.
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