Japanese trading houses, including Mitsubishi Corp. and Marubeni Corp., rallied on Tuesday after Berkshire Hathaway Inc.’s plans to increase holdings were seen a stamp of approval for the sector.
Mitsubishi rose 9.2% as of 2:55 p.m. Tokyo time, headed for the biggest advance in a year. Marubeni jumped 8%, while Mitsui & Co., Itochu Corp. and Sumitomo Corp. were also poised for the strongest gains since August. The broader Topix index slid 0.2%.
Warren Buffett’s conglomerate said in 2020 that it had invested in the firms. Berkshire originally agreed to keep its holdings at the companies below 10%, but the trading houses have agreed to relax the ceiling “moderately,” Buffett said in his annual investor letter dated Feb. 22.
“Trading houses are trading at well below their peak now, so Buffett probably sees this as a chance to buy more,” said Norikazu Shimizu, an analyst at IwaiCosmo Securities Co. “With Trump’s presidency and lots of changes to tariff policies, the market is uncertain, but trading houses are involved in a wide range of business, so Buffett likely sees them as a safe bet.”
The trading houses—which run businesses spanning overseas oil and gas production to salmon farming and TV shopping—and have outpaced the Nikkei 225 since Buffett’s investment was announced. While the companies have benefited from a surge in commodity prices from 2022, their diversity in other segments helps them weather price volatility.
Buffett’s interest “is proof that the trading company sector, including our company, is highly valued,” Marubeni said in an emailed statement.
Itochu said it’s progressing talks with Berkshire on potential collaborations, such as Duracell or Fruit of the Loom, according to a statement from the Japanese company. Berkshire’s sprawling businesses include the battery brand and the retailer.
Buffett praised Japan’s trading firms for increasing dividends when appropriate, conducting share buybacks when it is “sensible to do so,” and for being less aggressive in their executive pay than U.S. counterparts.
A measure of trading houses on the Topix index trades at about 10 times estimated earnings, around levels seen in June 2023, and compares with 14.5 times for the broader Topix index, according to data compiled by Bloomberg.
“Over time, you will likely see Berkshire’s ownership of all five increase somewhat,” the veteran investor said. “Our holdings of the five are for the very long term, and we are committed to supporting their boards of directors.”
Investors have been speculating over Buffett’s next move since Berkshire Hathaway in October sold its biggest-ever yen bond since its debut issuance in 2019. The U.S. company has been a regular issuer in the Japanese currency since then, and has yen notes maturing in April, according to data compiled by Bloomberg.
Taketoshi Tsuchiya, chief executive officer of Tsuchiya Asset Management Co. said that Berkshire’s credit quality makes its bonds attractive. Added to that, for borrowers, yen borrowing costs are still at relatively low levels, he said.
Mitsubishi is in discussion with Berkshire on cooperating on individual projects, including through joint investments, the Tokyo-based trading house said on Sunday. Mitsui says it plans to have a dialog with Berkshire going forward.
“This is a tailwind for trading company stocks as a whole, and it seems likely to lead to a certain sense of security for investors,” said Hideyuki Ishiguro, chief strategist at Nomura Asset Management Co.