Warren Buffett Boosts Bets On 5 Japanese Companies: Oracle Of Omaha Says Admiration 'Has Consistently Grown'

Warren Buffett, the renowned investor and chairman of Berkshire Hathaway, has expressed his admiration for five Japanese trading houses, indicating his intention to increase his company's investments in these firms. In his annual letter to shareholders, released on February 24, 2025, Buffett highlighted the growing admiration he has for these companies, stating that his appreciation for their capital deployment strategies, management, and investor relations has consistently grown over the years. The five companies in question are Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo, all of which are major players in the Japanese trading industry.

Buffett's admiration for these companies is rooted in several factors that have drawn his attention and influenced his decision to increase his investments. Firstly, he has praised their disciplined approach to capital management, noting that they increase dividends when appropriate, repurchase shares when it is sensible to do so, and maintain executive compensation programs that are less aggressive compared to their U.S. counterparts. This indicates that these companies prioritize shareholder value and maintain a balanced approach to capital allocation. Secondly, Buffett was initially drawn to these companies in 2019 due to their impressive financial records and low stock prices. He was "amazed at the low prices of their stocks" and saw an opportunity to invest in undervalued assets with strong fundamentals. Lastly, Buffett has noted that these companies operate in a manner similar to Berkshire Hathaway itself, investing across diverse sectors domestically and abroad, much like Berkshire's own investment strategy. This similarity in business models has likely contributed to Buffett's confidence in these investments.

Berkshire Hathaway's holdings of the five Japanese companies are intended to be for the very long term, with the company committed to supporting their boards of directors. Initially, Berkshire agreed to keep its holdings below 10% of each company's shares, with the understanding that this limit may be moderately relaxed over time. As of last year, Berkshire's total cost for these investments was $13.8 billion, with a market value of $23.5 billion. The annual dividend income from these investments is expected to be approximately $812 million by 2025, with interest costs on yen-denominated debt projected at $135 million.

Buffett's confidence in the long-term prospects of these companies is further bolstered by their shareholder-friendly policies and his positive experience with their management. Despite their recent struggles, these companies are taking steps to address their challenges and improve their performance. For instance, they have agreed to moderately relax the ceiling on Berkshire's ownership, allowing the company to increase its stake in the future. This indicates a willingness to work together and find solutions to their current difficulties, which aligns with Buffett's long-term investment approach.

In conclusion, Warren Buffett's admiration for the five Japanese trading houses is based on their disciplined capital management, shareholder-friendly policies, capital deployment strategies, management, and investor relations. Despite their recent struggles, these companies are taking steps to address their challenges and improve their performance, which has led Buffett to increase his investments in these firms. As the Oracle of Omaha continues to express his admiration for these companies, it is likely that Berkshire Hathaway will maintain and potentially even expand its holdings in these five Japanese trading houses.