From The Wall Street Journal, April 18:
The Berkshire Hathaway head hinted in a recent interview that his interest in Japan’s trade giants goes beyond just holding their stocks
Warren Buffett has shone a spotlight on Japan’s trading companies—gigantic conglomerates with diverse sets of businesses and long histories. So far, they have been good investments for the celebrated investor—but these storied Japanese companies could be his partners, too.
Last week, Mr. Buffett said in an interview with local publication Nikkei that his company Berkshire Hathaway has raised its stake in five Japanese trading conglomerates— Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo. Berkshire now owns more stocks in Japan than in any other country outside the U.S. Berkshire first disclosed its investments in the five trading giants in August 2020.
Some of these trading companies, known as sogo shosa in Japanese, trace their roots to the 19th century. They used to dominate Japan’s exports and imports, helping source raw materials globally and sell Japanese products overseas. But gradually they have morphed into a different species by investing both upstream—in mining and agriculture—and downstream in retail.
Even though they are called trading companies, most of their revenue no longer comes from taking a cut of international trade or wholesaling as middlemen. Their investments around the world in a multitude of sectors—from textiles to machinery—generate the bulk of their profits. They have a particularly big footprint in natural resource-related businesses, given that Japan has to import much of its energy, food and minerals.
Mitsui, for example, invested in coal and iron ore in Australia and copper mines in Chile. Itochu owns banana plantations in the Philippines. Mitsui and Mitsubishi have liquefied natural gas projects across the world, helping secure supplies for Japan—which was the largest LNG importer in 2022. The two companies still own stakes in Russia’s Sakhalin-2 LNG project, even though they had to write down its value last year.
Last year’s surge in commodity prices boosted their profits—and Berkshire Hathaway’s. Mitsui’s profit for the nine months ending in December rose 33% from a year earlier. About two thirds of that came from its energy, mineral and metal-related investments.....
.....MUCH MORE
Interesting, no?
Shades of John Templeton but with an emphasis on extremely sophisticated services companies. rather than manufacturing.
And a bit more expensive than Templeton's early entries at 2x earnings but those days are long gone and Warren has adapted to the new realities. Value is where you find it, no longer in Ben Graham's methodology but in the moats. So it goes.
If interested see also:
