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Buffett’s Berkshire Wagers $6 Billion on Japan Trading Firms

(Bloomberg) — Warren Buffett’s Berkshire Hathaway Inc. bought stakes in five Japanese trading companies that dominate the nation’s energy and raw-materials industries, adding to the billionaire investor’s wager on the commodities sector and marking one of his biggest-ever forays into Asia’s second-largest economy.

Berkshire acquired the stakes of about 5% in Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. over the past twelve months, the U.S. conglomerate said in a statement. The combined investments were valued at more than $6 billion after shares of all five companies jumped at least 5% in Tokyo trading on Monday.

While Buffett has stayed relatively cautious on the acquisitions front since Covid-19 rippled through the global economy, his company has been increasing its commodities exposure with deals including a $4 billion agreement to purchase most of Dominion Energy Inc.’s natural gas pipeline and storage assets in July. Valuations in the sector have trailed the broader stock market in recent years, dragged down by falling commodities prices and an investor rotation toward technology stocks that has accelerated during the pandemic.

Buffett’s wager could help bolster sentiment toward both commodity plays and Japan. The $5 trillion economy is not only grappling with a persistent coronavirus outbreak and the postponement of the Tokyo Olympics, it’s also going through a leadership transition after Prime Minister Shinzo Abe announced his resignation for health reasons last week. Japan’s benchmark Topix index climbed 1.8% on Monday, pacing regional gains and snapping three straight days of losses. Foreign investors have sold a net $43 billion of Japanese shares this year, on course for the biggest annual withdrawals since 2018.

“I am delighted to have Berkshire Hathaway participate in the future of Japan and the five companies we have chosen for investment,” 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.”

Japan’s general trading houses, known as “sogo shosha” with roots dating back hundreds of years, supply the resource-poor country with everything from natural gas to noodles, and have spent the last few decades transforming into conglomerates that hold equity in hundreds of diverse companies around the world. While they operate in areas like textiles and machinery, they still derive much of their revenue from energy, metals and other commodities.

Berkshire plans to hold the Japan investments for the long term and has pledged to only own as much as 9.9% of the shares in any of the five companies, unless given specific approval by the investee firm’s board of directors, according to the statement.

Mitsui said it wasn’t aware of the reasons behind Berkshire’s investment, while the other four trading companies couldn’t immediately comment.

The move marks a big push abroad by Buffett’s firm, which has long accumulated investments in U.S. companies including Apple Inc. and Coca-Cola Co. Berkshire has also sought investments abroad with holdings in China’s BYD Co. through its energy business and Brazilian payment company StoneCo Ltd. Buffett said in 2018 that there was a good number of countries he’d be willing to invest in, although foreign firms didn’t turn to Berkshire for investments as quickly as U.S. companies might.

The legendary investor has piled deeply into various industries before, taking a stake in four major U.S. airlines in 2016, though he ended up selling those stocks in 2020 as the pandemic brought most air travel to a halt.

Buffett, who celebrated his 90th birthday on Aug. 30, has built Berkshire into a conglomerate valued at more than $521 billion, with operations ranging from insurers to industrial giants such as Precision Castparts Corp. and even retailers such as Fruit of the Loom. The company also has a significant equity portfolio, totaling about $207 billion at the end of June, with stakes in companies such as Apple Inc. and Bank of America Corp.

(Updates with details throughout)

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