By Jack Denton
DAVOS, Switzerland -- Warren Buffett's Berkshire Hathaway has been building its stake in the five largest Japanese general trading companies since disclosing an increase in ownership last summer, the CEO of Sumitomo, one of those companies, told Barron's on Monday.
Berkshire Hathaway first announced a 5% passive stake in the five largest Japanese general trading companies in August 2020, before revealing last June that it had increased its interest to an average of more than 8.5% across the group of firms.
At the time, Berkshire Hathaway said it may increase its holdings depending on price, but that Buffett had pledged that it would not purchase more than 9.9% of any of the five companies before seeking approval from the respective boards.
That time may soon be coming, according to Masayuki Hyodo, the CEO of Sumitomo Corporation, one of the five general trading companies in which Berkshire has invested. Those investments represent its only public holdings in Japan.
"Through the information I have, it is increasing -- not only Sumitomo, but all five trading companies. His share is increasing every day," Hyodo told Barron's in an interview on the sidelines of the World Economic Forum late Monday.
Barron's has reached out to Berkshire Hathaway for comment.
Berkshire sold 122 billion yen ($837 million) worth of yen-denominated bonds in November, an offering that sparked speculation that Buffett may be raising cash to increase investments in Japan.
Berkshire's holdings consist of the five largest sogo shosha, or general trading companies, which are historic and sprawling conglomerates that play an influential role in the Japanese economy. These companies are defined by their highly diversified holdings, touching natural resources, energy, chemicals, metals, manufacturing, retail, real estate, and healthcare.
Berkshire owns Sumitomo alongside Mitsubishi, Mitsui, Itochu, and Marubeni. The combined stakes were worth some $20 billion as of June, as per Barron's estimates -- and have been among the most successful picks for Buffett in recent years, with the five stocks more than doubling on average since Berkshire bought them in 2020. Japan's stock market has been on a tear, with the benchmark Tokyo Nikkei 225 recently topping the highest levels since 1990.
Buffett and Berkshire executive Greg Abel -- the Sage of Omaha's heir apparent -- traveled to Japan last year and "continue to be delighted with the investments and hope, eventually, to own 9.9% of each of the five companies," Berkshire said in June. "Their aggregate value considerably exceeds that of Berkshire-held public stocks in any other country outside of the United States."
Berkshire's Japanese investments were originally described as intended for the long term -- rhetoric repeated last June -- and raised alongside references to historic passive interests in U.S. companies such as Coca-Cola, which Buffett has owned for more than three decades.
If, indeed, Berkshire were to seek permission from a general trading company board to increase its stake above 9.9%, the sentiment as described by Hyodo appears receptive. While Sumitomo's CEO deferred to the board, he said: "I think [Berkshire] are a very important partner, as an investor to our company but also to any business opportunity provided to each other."
Hyodo, for his part, met Buffett when the investor visited Japan last year.
"We talked about the history of Sumitomo Corporation, and how we conduct the business. What are the thoughts I have as the CEO of Sumitomo Corporation," said Hyodo. "At the end of the meeting, he said: 'exceptional.' That is the only word."
Write to Jack Denton at jack.denton@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 16, 2024 03:47 ET (08:47 GMT)
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