Warren Buffett, a world-renowned investor and owner of Berkshire Hathaway Inc., has taken a big step to diversify his conglomerate. Berkshire Hathaway Inc has acquired more than 5% of shares in five major Japanese trading houses, together worth over $6 billion.
At the end of August, Buffet announced long-term investments in a number of Japanese companies, including Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co., and Ltd, and Sumitomo Corp. "The five major trading companies have many joint ventures throughout the world and are likely to have more," Buffett pointed out. He is also confident that these companies' shares could rise by 9.9%.
Experts say that Warren Buffett went beyond the US market to reduce his company's dependence on the US economy. Importantly, during the last quarter of 2020, the US economy significantly contracted against the background of the long-term crisis caused by the COVID-19 pandemic.
Nevertheless, some market experts were puzzled by Buffet's choice of country. The equities of Japanese trading houses heavily rely on the energy sector. Besides, they are highly volatile due to fluctuations in commodity prices. Yet, it did not spook the investor. Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo pinpoints "their cheap valuation may have been an attraction".
Investors in the global market gave a high assessment of Buffer’s decision to buy 5% of shares in five Japanese companies for $6.63 billion. Marubeni and Sumitomo soared by more than 9%, and the share price of Mitsubishi and Mitsui increased by more than 7%. Itochu advanced to 4.2%, capping a record high.
Notably, five Japanese firms that Buffett has invested in are deeply involved in Japan's economy in such areas as steel, shipping, commodities. No wonder, they are quite attractive for large investors. Although the lion's share of his portfolio consists of American companies' shares.
Berkshire Hathaway's investment list includes several foreign firms, e.g. Israel's IMC International Metalworking and Germany's Detlev Louis. Berkshire owns shares in more than 90 companies, including BNSF railroad and Geico car insurer. Buffet also invests in dozens of companies including American Express, Bank of America Corp, and Coca-Cola Co.
Despite large investments from Buffet, Marubeni, Mitsubishi, and Sumitomo are still below their last year's peaks. Among the five companies that the billionaire has invested in, only Itochu shares are trading above their book value. The market cap of the other four is less than the value of their assets, which makes them attractive to a value investor like Buffett.
