On Tuesday, although Japan's Nikkei 225 index opened lower after a short holiday break, dropping more than 1%, a "Buffett wave" quickly swept through the market as Buffett revealed in his annual shareholder letter that he would increase his stake in Japan's five major trading companies. The stock prices of these companies surged significantly, with Mitsubishi Corporation seeing an intraday increase of over 8%, and Marubeni, Mitsui & Co, Itochu Corporation, and Sumitomo Corporation rising between 5% and 7%.
The sharp rise of these trading companies contrasted sharply with the Nikkei 225 index, which opened lower, following the decline of U.S. stocks, amidst a subdued market sentiment. Japan's market was closed on Monday due to the public holiday for the Emperor's birthday.
Japan's five major trading companies, also known as "sogo shosha," typically engage in trading raw materials, products, and food, and are also involved in commodities, shipping, and steel, serving as intermediaries and logistical support. Buffett began investing in these companies in 2019 and stated in his latest annual shareholder letter that he plans to increase his holdings when appropriate.
Berkshire Hathaway initially pledged to keep its holdings below 10%, but Buffett revealed that the companies have agreed to slightly relax this cap. He praised the management of the five trading houses, noting their prudence in matters of dividends, stock buybacks, and executive compensation, and emphasized that Berkshire's investment is long-term, intending to continue supporting these companies.
As of the end of 2024, Berkshire's total investment cost in the five Japanese trading companies was $13.8 billion, with a market value reaching $23.5 billion. Notably, Berkshire bought Japanese stocks by issuing yen bonds, thus avoiding exchange rate fluctuations.
Mitsubishi Corporation, the day's leading gainer, stated that it is discussing individual project collaborations with Berkshire Hathaway, possibly including joint investments. Market analysts suggest that any comment from Buffett could act as a catalyst for foreign capital inflow into Japanese stocks, especially given his enormous influence. In fact, since Buffett announced his investment, these Japanese trading companies' stock performance has consistently outperformed the Nikkei 225 index, particularly driven by the rise in commodity prices, demonstrating resilience to price fluctuations due to their diversified businesses.
Overall, Buffett's favor toward Japan's five major trading companies and his commitment to long-term investment undoubtedly sends a positive signal to the Japanese stock market. In the coming months, the market may continue to watch whether Buffett will further increase his holdings and explore additional collaborations with these trading companies.
