Warren Buffet largely remained muted during 2020. His company, Berkshire Hathaway did not make any major acquisitions, despite sitting on cash of almost $146bn (in 2020).
However, there was one announcement by the company that took everyone by surprise in September 2020. The Oracle of Omaha decided to invest around $6bn in Japanese companies, his largest investment outside the US to date.
Warren Buffet has renounced Japanese companies in the past. So the question on everyone’s mind was what made him invest in 5 of Japan’s largest “Sogo Sosha” (roughly translating as “trading companies”)? Is there a stroke of genius that no one has figured out yet? Only time can tell. But this article is not about Mr. Buffet’s vision but rather about the companies he has invested in, and these are:
Sumitomo Corp. (SSUMY)
In late August, Sumitomo’s CEO Masayuki Hyodo, got a surprise when he opened his laptop to find an email from Berkshire Hathaway saying that they had acquired a 5% stake in his company.
The company is more than 400 years old and started as a medicine and book store. Now it is a huge trading company with diverse business interests such as the import and export of goods that range from metals and machinery to fuel and textile. In addition, the company is a conglomerate that owns and runs various construction, insurance, shipping, real estate, and financing businesses.
The company’s stock is listed on the Tokyo Stock Exchange and currently trades at a price of JPY 1,387, with a market cap of JPY 1.735 trillion. On 1 September 2020, the company’s stock went up to JPY 1,400 and went as low as JPY 1,144 in late October.
During the last quarter ended in September 2020, the company reported total revenue of JPY 1,112 billion and a net loss of JPY 19 billion due to one-off write-downs on its Madagascar nickel mining business.
Mitsubishi Corp. (MSBHF)
Mitsubishi is Japan’s largest “Sogo Sosha” or trading company. The company has a diverse range of business groups that include, automobile manufacturing, professional services, living essentials, IT, electronics, metals, and fuels.
The company operates in seven business segments, namely Global Environment Infrastructure which has a portfolio with business interests in water, electricity, transport, and others; New Industrial Finance, which engages in real estate, leasing, corporate investing, and development; Energy segment that deals in exploration and production of crude oil and natural gas, LNG and others.
Other segments include the Metal segment that deals in trading of metal, investments in mines, and production of steel among others; Machinery segment, which handles the manufacturing, sales, financing, and logistics of machinery; Chemical segment that is primarily in the business of import and export of chemicals; Life Industry segment which provides services and products across different fields.
Other than this the company has a 10% stake in Mitsubishi Motors and it runs satellite communications through a Joint venture.
Currently, Mitsubishi’s share is trading at JPY 2,647.50 with a market cap of JPY 3.933 trillion. On 1st September 2020, the stock price went up to JPY 2,591. Till the year ended March 2020, the company had revenues of JPY 14.779 trillion and a Net Profit of JPY 535 billion. Mitsubishi has a dividend yield of 5%, making it a good value play.
Mitsui & Co. (MITSY)
Like Mitsubishi, Mitsui & Co. has been an unwavering part of the Japanese economy, dating back to the 19th century. It is also one of the largest conglomerates in the world with a diverse portfolio of businesses with interests in energy, food, petrochemicals, textiles, and logistics. The company’s business interests can be broken down into seven segments.
These segments are The Steel Products segment; The Metal Resources segment; The Machinery and Infrastructure segment; The Chemicals segment; The Energy segment; The Lifestyle Industry segment and The Next Generation and Function Promotion segment that provide services related to insurance, leasing, asset management, and others.
Currently, Mitsui & Co’s share is trading at around JPY 2,000 with a market cap of JPY 3.25 trillion and a dividend yield of around 4%. During the quarter ended September 2020, Mitsui and Co posted revenue of JPY 1,521 billion and a Net Profit of JPY 50.6 billion.
Itochu Corp. (ITOCY)
Itochu Corp. is a general trading with a history dating back to the 1850s. The company has a global presence and operates in various business segments that include, Textiles segments with operations ranging from textile raw materials to consumer clothing; Machinery segment which also includes large infrastructure and development projects; Metals segment; Energy ; Chemicals segment; Food segment produces; Housing Life segment and Information and Finance.
Itochu has also diversified into data communications and satellite communications business segments. As reported by the Wall Street Journal, the company’s CEO Masahiro Okafuji, welcomed the investment made by Warren Buffet and hoped that it would bring more investors to Japan.
Itochu Corp’s stock is currently priced at JPY 2,997 with a market cap of JPY 4.75 trillion. It is the only stock that has showcased a healthy return since the announcement by Berkshire Hathaway. Since 31st August 2020, the stock is up almost 15%. For the quarter ended September 2020, the company reported revenues of JPY 2,529 billion and a Net Profit of JPY 155 billion.
Marubeni Corp. (MARUY)
In comparison to Warren Buffet’s other Japanese investments, Marubeni Corp is relatively young, having been founded in 1918. It is however Japan’s fifth-largest trading company now with varied business interests that include, food, insurance, logistics, financial business, real estate, agriculture, chemical, paper pulp, energy, power plants, and transport equipment.
In 2018, the company announces that it had forged a long term plan of moving away from energy and coal mining, and doubling its investments in renewable and green energy.
Marubeni Corp’s share price is currently at around JPY 700 with a market cap of JPY 1.2 trillion and a dividend yield of around 4%. In September 2020 the share price was at JPY 647 having gained almost 8% since then. During the three months that ended in September 2020, the company recorded revenues of JPY 1,458 billion and a Net Income of 46 billion.
References
https://finance.yahoo.com/quote/SSUMY/financials?p=SSUMY
https://finance.yahoo.com/quote/MSBHF/financials?p=MSBHF
https://www.bloomberg.com/quote/8058:JP
https://www.reuters.com/companies/MSBHF.PK
https://www.reuters.com/companies/MITSY.PK/financials/income-statement-quarterly
https://finance.yahoo.com/quote/MITSY/financials?p=MITSY
https://finance.yahoo.com/quote/ITOCY?ltr=1
https://www.reuters.com/companies/ITOCY.PK/financials/income-statement-quarterly
https://www.bloomberg.com/quote/8001:JP
https://www.bloomberg.com/quote/8002:JP
https://www.reuters.com/companies/MARUY.PQ/financials/income-statement-quarterly