Berkshire Hathaway has bought a 5 per cent stake in each of Japan's five biggest trading houses, together worth over $6 billion (€5 billion) , marking a departure for chairman Warren Buffett as he looks beyond the United States to diversify his conglomerate.
The long-term investment in Itochu, Marubeni, Mitsubishi, Mitsui & Co and Sumitomo could see the stakes rise to 9.9 per cent, Berkshire said on Sunday, Mr Buffett's 90th birthday.
“The five major trading companies have many joint ventures throughout the world and are likely to have more,” Mr Buffett said in 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.
Mr 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- Buffett-like to buy into all five companies rather than selecting a few."
On Monday, Marubeni and Sumitomo ended up over 9 per cent , followed by Mitsubishi and Mitsui at over 7 per cent . Itochu rose 4.2 per cent to a record high. Berkshire shares were flat in premarket trade.
Even so, Marubeni, Mitsubishi and Sumitomo are still 10 per cent down on the year, versus a 6 per cent fall in the Topix index. Itochu, which has shifted towards consumer-related businesses, is the only one whose share price is higher than last year. – Reuters