The company said in a statement (pdf) that it acquired stakes of about 5 percent in Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co., and Sumitomo Corp., with the purchases made over the past year. Shares of the five companies surged by at least 4 percent in Monday trading on the Tokyo stock exchange after news of Birkshire’s investment broke.
“I am delighted to have Berkshire Hathaway participate in the future of Japan,” Buffett said in the statement. “The five major trading companies have many joint ventures throughout the world and are likely to have more of these partnerships. I hope that in the future there may be opportunities of mutual benefit.”
Global investors have so far this year pulled $43 billion from Japanese stocks, according to Bloomberg figures, with the bet made by Buffett, known to be a sharp-eyed bargain-hunter, running counter to that exodus. The five trading houses Berkshire bought into are viewed as relatively undervalued, with price-to-earnings ratios, in most cases, well below the average for markets in Japan and the United States.
“Their cheap valuation may have been an attraction,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo, in remarks to Reuters. “But it is un-Buffett-like to buy into all five companies rather than selecting a few.”
Berkshire also said it might increase the stakes to up to 9.9 percent in any of the companies and, citing its holdings of American big-name stocks, described the investments as long-term.
“Berkshire Hathaway, the largest company in the U.S. as measured by shareholders’ equity, has a long history of substantial, passive holdings in successful businesses. For instance, Berkshire Hathaway has held major stakes in Coca-Cola for 32 years, American Express for 29 years and Moody’s for 20 years,” the statement said.
Berkshire’s equity portfolio amounted about $207 billion at the end of June, a second quarter SEC filing (pdf) shows, while its combined holdings of short-term Treasury bills and cash stood at around $142 billion.
A spokesman for Itochu, one of Japan’s leading trading houses with operations in 62 countries and a history dating back to 1858, called Berkshire’s announcement, “bright news for not only the company but also Japan’s stock market.”
Berkshire’s investments in Japan represent a notable push abroad by the billionaire investor, whose benchmark equity value gauge, dubbed the “Buffett Indicator,” recently hit an all-time high of around 183 percent, suggesting U.S. stocks may be overvalued and offer slim pickings for those on the hunt for bargains.