Warren Buffet's Japan Play
Warren Buffet’s Berkshire Hathaway started buying five of the largest Japanese “Sogo Shoshas” in August 2020, accumulating about a 5% stake in each of them, and then investing a little more in each stock during November 2022.
Here are the five companies with their stock tickers.
Itochu (ITOCF)
Sumitomo (SSUMF)
Marubeni (MARUF)
Mitsubishi (MSBHF)
Mitsui (MITSY)
The trading business (import/export) used to be the core business of these giants. Through the 1980s, over 50% of Japan’s exports and 75% of the country’s imports went through one of the major Shoshas.
Since then, they have evolved to became more like investment holding companies while overseeing operating companies.
In short, they do some trading, some investing both in Japan and globally, and some managing the different businesses they have invested in when they have acquired a controlling stake.
These conglomerates are now a blend of miners, salesmen, consultants, brokers, shippers, dealmakers, and bankers.
One thing has not changed. They still attract the cream of the crop of graduates of Japanese universities.
Today, I recommend what I believe is the best one.
The name Mitsui means “three wells,” and three wells are still represented in the Mitsui trademark.
The Mitsui story began in 1673 when Takatoshi Mitsui (1622–94), the son of a sake brewer and soy sauce maker, opened textile shops in Kyoto and Edo (now Tokyo). Hachirobei Mitsui, then diversified and over time, the Mitsui group made everything from silk kimonos to skyscrapers, while investing and spinning off brands like Toshiba, Toyota, and Sapporo Beer.
Mitsui now stands out among the big five by leaning into mining and materials.
Mitsui has entered joint ventures around the world, taking project stakes in iron ore, metallurgical coal, copper, nickel, and LNG with 50%-60% of profit coming metals and energy. Mitsui & Co. has recently signed agreements to acquire a 40% interest in the Rio Tinto-operated Rhodes Ridge iron ore project in Western Australia for $5.3 billion.
Mitsui also plans to re-enter global precious metals trading to hedge client risk after a nine-year absence, according to Reuters.
But Mitsui’s chairman emphasizes that Mitsui is not a resource company. Rather he describes the company as a place where smart people identify new trends and pursue big profits through small experiments. For example, Mitsui owns 33% stake in IHH Healthcare, the largest hospital group in Asia, and 17% stake in Penske Automotive in North America.
Other sectors of activity include energy, infrastructure, agriculture and food, and consumer retail.
Mitsui boasts assets of $112 billion, 6 billion of profits and $7 billion of operating cash flow. It has 475 affiliated companies and operations in 62 countries.
Despite all these strengths, Mitsui stock is down 20% over the last year and trades at just a bit above book value and ten times forward earnings.