Buffett Boost: Japan’s Big Five Trading Companies Soar on Berkshire’s Praise

Praises Japan’s big five trading companies in his annual letter

Warren Buffett has once again energized the Japanese stock market.

According to Bloomberg on the 26th (local time), Buffett, the chairman of Berkshire Hathaway, praised the five major Japanese trading companies (Itochu, Marubeni, Mitsubishi, Mitsui, Sumitomo) at length in his annual letter to shareholders on the 24th.

Following Buffett’s letter, Marubeni’s stock price rose by 5.6% in the Japanese market, and the shares of the five major trading companies all showed an upward trend. These five major trading companies’ stock prices have recorded double-digit growth rates this year. The stock prices of Mitsubishi Corporation and Mitsui & Co., Ltd. have risen by 44.26% and 21.92%, respectively, this year.

Buffett highly praised the shareholder-friendly policies of the five companies in his annual letter. Approximately one page of the 16-page letter was related to the five companies. Buffett stated, “They pay much less aggressive compensation to management than American companies, and it’s noteworthy that they only distribute a third of their profits as dividends.” He added, “Their substantial cash holdings are used to build various businesses, and the rest is used to repurchase stocks, much like Berkshire.” He also emphasized his willingness to partner with Berkshire’s subsidiaries and these five major trading companies.

Berkshire, led by Buffett, has steadily increased its stake in the five major trading companies. Berkshire’s stake in these companies is 9% each, and Buffett has expressed his intention to increase the stake to 9.9%. There is room for Berkshire to acquire additional shares. Through the earning statement, Berkshire reported that it invested a total of 1.6 trillion yen (approximately $10.6 billion) in the acquisition of shares of the five companies from July 2019, and the unrealized gain as of the end of last year was $8 billion.

The Japanese stock market set a new record on Buffett’s good news day. The Nikkei 225 average stock price (Nikkei Index) closed at 39,233, up 0.35% from the previous day, setting a record high for the second consecutive trading day.

Masayuki Otani, chief market analyst at Securities Japan, Inc., said, “Berkshire is highly likely to buy stocks on the premise of long-term holdings, so expectations and interest in these trading companies will grow even more.”