Warren Buffett has celebrated his 90th birthday with a multi-billion dollar bang that has set Japan’s stockmarket alight on Monday.
It is yet another example of how in a single statement, only he and his company can move markets.
In a statement on Monday (timed before trading started on the Tokyo Stock Exchange) Berkshire said it acquired its stakes in Itochu Corp, Marubeni Corp, Mitsubishi Corp, Mitsui & Co, and Sumitomo Corp over the past year.
Shares in the five companies surged at least 5% and in some cases more than 10%, helping drive the Nikkei index up 1.1% on Monday. It was up more than 2% earlier in the session after news of the Buffett move emerge.
Itochu shares rose 4.2%, Marubeni shares were up 9.5%, Mitsubishi Corp shares jumped 7.7%, Mitsui & Co shares jumped 7.3% and Sumitomo Corp leapt 9% in a very active session.
Berkshire didn’t say how much it had spent to acquire the stakes. Based on the companies’ Friday closing prices, a 5% stake in each would collectively be worth about $US6 billion.
Berkshire said it intends to hold the investments for the long term, and may boost its stakes to 9.9%.
A Berkshire insurance business, National Indemnity Co, is holding the shares.
Buffett and Berkshire Monday made Japanese investors, companies and investors forget about the impact of the surprise retirement of Shinzo Abe as Prime Minister last week and instead focus on a swoop by his Berkshire Hathaway on the five companies central to the country’s economy and cultural life.
Rather than fret about the impact of Abe’s departure and the political vacuum it leaves, Buffett’s revelation that Berkshire had quietly built stakes in the five largest trading houses in Japan, set the Tokyo stockmarket alive on Monday.
The rise and reaction underlines the still strong impact Buffett and Berkshire’s names have on investors settlement – would news of moves by Apple or Facebook have the same impact, especially when Buffett made it clear the move was passive and supportive of the companies.
In terms of sector moves it is a much wider approach than the last time Buffett and Berkshire moved into multiple companies in a sector – the US airline business starting in 2016 and eventually became the largest shareholder in united, America, Southwestern and Delta.
They were sold this year in the wake of the price collapse triggered by the coronavirus pandemic, border closures and widespread lockdowns that has badly damaged aviation, travel, tourism and hotels and associated businesses. The sales ended that play.
Analysts have been waiting for signs of a new approach to a sector or group if companies in the US, no one saw a move to embrace the attractions of a whole economy, let alone Japan and five of the country’s largest and most conservatively run trading houses or Sogo Sosha.
The five are often called trading companies, but investment company might be a more precise description. All have stakes in a variety of businesses including interests in energy and mining. Mitsubishi and Itochu each control a major convenience-store chain in Japan.
The company revealed in a rare statement to coincide with his birthday that it had made a major foray into the heart of the Japanese economy – its huge trading houses (https://www.berkshirehathaway.com/news/aug3020.pdf).
Berkshire said it has acquired slightly more than 5% of the shares in five large Japanese companies in purchases that have already been paid for and won’t have much impact on the $US146.6 billion cash pile Berkshire had at the end of June.
“I am delighted to have Berkshire Hathaway participate in the future of Japan,” Buffett said in a statement. “The five major trading companies have many joint ventures throughout the world and are likely to have more…. I hope that in the future there may be opportunities of mutual benefit.”
Buffett stressed that he is a ‘friend’ of the companies, not an activist invader and Berkshire stressed that point in the statement, pointing out that it has 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.
“I am delighted to have Berkshire Hathaway participate in the future of Japan and the five companies we have chosen for investment. 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.”
The Japanese investments will help Berkshire cut its over dependence on the US equities and shares.
Berkshire owns more than 90 businesses including the BNSF railroad and Geico car insurer outright. The company also has a small quota share insurance deal with IAG in Australia.
It also invests in dozens of companies including Apple, Bank of America, the three giants mentioned above and dozens of other small stakes in a portfolio valued at more than $US200 billion.
It only owns a couple of stakes in foreign companies – Israel’s IMC International Metalworking and German motorcycle apparel retailer Detlev Louis.
