Buffett’s Berkshire Built Positions In Japan’s 5 Largest Trading Firms

Billionaire Warren Buffett’s investment conglomerate Berkshire Hathaway announced that it has bought slightly more than 5% in each of 5 of Japan’s leading trading companies.

Berkshire (BRK.A) bought the stakes in companies Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo through its subsidiary, National Indemnity Company. The holdings were acquired over a period of approximately twelve months through regular purchases on the Tokyo Stock Exchange. Together, the five 5% stakes were worth 700 billion yen ($6.63 billion), according to Reuters calculations.

Berkshire, the largest company in the US as measured by shareholders’ equity, disclosed that it intends to hold the Japanese investments for the long-term. Depending on price, Berkshire may increase the holdings up to a maximum of 9.9% in any of the five investments. The company said it will make no purchases beyond that point unless given specific approval by the investee’s board of directors.

“I am delighted to have Berkshire Hathaway participate in the future of Japan and the five companies we have chosen for investment,” Buffet said in a statement. “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.”

Berkshire has 625.5 billion of yen-denominated bonds outstanding, maturing at various dates beginning in 2023 and ending in 2060. Consequently, the company has only minor exposure to yen/dollar movements, it said.

Earlier this month, Berkshire built up a new position in Toronto-based miner Barrick Gold (GOLD) and continued to divest shares in a number of large US banks during the second quarter. Berkshire bought 20.9 million shares in Barrick Gold worth about $563.6 million.

Berkshire’s class A shares, which plunged to a low in March have since recovered but are still trading 3.7% lower than at the start of the year. However, the stock is up 11% over the past month. (See BRK.A stock analysis on TipRanks)

Edward Jones analyst James Shanahan this month reiterated a Buy rating on the shares saying that the “stock is cheap”.

“Some of the businesses that are struggling are poised to start performing better later this year and in 2021,” Shanahan wrote in a note to investors. The stock “gives clients broad exposure to the US economy – like a diversified mutual fund – at a low cost to own.”

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