Buffett’s Berkshire buys 5% stake inJapan’stradinghouses
NEW YORK: Berkshire Hathaway Inc has bought a 5% stake in each of Japan’s five biggest trading houses, together worth over $6 billion, marking a departure for chairman Warren Buffett as he looks beyond the US to diversify his conglomerate.
The long-term investment in Itochu Corp, Marubeni Corp, Mitsubishi Corp, Mitsui and Co Ltd and Sumitomo Corp could see the stakes rise to 9.9%, Berkshire said on Sunday, Buffett’s 90th birthday.
“The five major trading comin panies have many joint ventures throughout the world and are likely to have more,” Buffett said a statement. “I hope that in the future there may be opportunities of mutual benefit.”
The investment will help reduce Berkshire’s dependence on the US economy, which in the last quarter contracted the most in at least 73 years as the Covid-19 pandemic took hold. Many of its businesses have struggled, including aircraft parts maker Precision Castparts from which it bore a $9.8 billion writedown.
Buffett’s choice in Japan, however, surprised market players as trading houses have long been far from investor favourites. As well as significant exposure to the energy sector and resource price volatility, tangled business models involving commodities as varied as noodles and rockets have long been a turn-off.
“Their cheap valuation may have been an attraction,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “But it is un-Buffettlike to buy into all five companies rather than selecting a few.”
Berkshire bought the littleover 5% stakes in about a year through insurance business National Indemnity Co.
Together, five 5% stakes were worth 700 billion yen ($6.63 billion), Reuters calculations showed based on Refinitiv data.
On Monday, Marubeni and Sumitomo ended up over 9%, followed by Mitsubishi and Mitsui at over 7%. Itochu rose 4.2% to a record high. Berkshire shares were flat in premarket trade.
Most of Berkshire’s operating businesses are American, though it has acquired a handful of foreign companies including Israel’s IMC International Metalworking and German motorcycle apparel retailer Detlev Louis.