How Buffett’s Japan trading house bid paid off
Few could understand the reasoning when Berkshire Hathaway bought into Japan’s five creaking, antiquated trading houses in 2020. But a spate of record results has vindicated Warren Buffett’s decision.
For the older among us there’s something pleasing about watching dinosaurs thrive as the bright young things struggle.
So there were a few smiles when, amid market turmoil that hammered the Zuckerbergs and Musks of this world, 91-year-old Warren Buffett was shown to be prescient for Berkshire Hathaway’s much-derided purchase of stakes in Japan’s trading houses.
Berkshire Hathaway (BH) bought just over 5% apiece of Mitsubishi Corp, Itochu, Marubeni, Sumitomo and Mitsui, with the potential to climb to 9.9%. The five trading houses, or sogo shosha, are throwbacks. They are wildly diversified in an age when focus is much preferred. They are filled with old-economy businesses that date back to the 19th century and with a troubling reliance on fossil fuels.
When BH spent over $6 billion in building the stakes, announced in August 2020, they seemed curious picks, even absurd. But through February 2022, the five houses announced a string of record-breaking numbers for the first nine months of the Japanese financial year, in most cases earning more profit in those three quarters than they had ever done before in a full year.