Berkshire to boost investments in Japanese trading houses

By Jonathan Stempel

NEW YORK (Reuters) - Warren Buffett said on Saturday that his conglomerate Berkshire Hathaway will likely increase its ownership in the five Japanese trading houses it holds.

In his annual letter to Berkshire shareholders, the billionaire investor said Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo agreed to "moderately relax" limits that capped Berkshire's ownership stakes below 10%.

Berkshire's investments in the companies totaled $23.5 billion at the end of 2024.

"Over time, you will likely see Berkshire's ownership of all five increase somewhat," Buffett wrote.

The 94-year-old Buffett also said he and Berkshire Vice Chairman Greg Abel, his designated successor as chief executive, are investing for the "very long term."

"I expect that Greg and his eventual successors will be holding this Japanese position for many decades and that Berkshire will find other ways to work productively with the five companies," Buffett wrote.

"Both of us like their capital deployment, their managements and their attitude in respect to their investors," Buffett added.

Known as "sogo shosha," Japanese trading houses trade in a wide variety of materials, products and food, often serving as intermediaries, and provide logistical support.

They are also deeply involved in the real economy in such areas as commodities, shipping and steel.

Berkshire began investing in the trading houses in 2019, drawn by their finances compared to their low stock prices, and revealed 5% ownership stakes on Buffett's 90th birthday in August 2020.

Buffett prefers to avoid businesses he says he does not understand.

He told Nikkei in 2023 that the trading houses are "really so much similar to Berkshire," the Omaha, Nebraska-based conglomerate he has led since 1965.

Berkshire spent $13.8 billion on its current holdings and expects $812 million of dividend income in 2025, Buffett said in the shareholder letter.

"This was a good value investment when others may have looked at them as value traps," said Cathy Seifert, an analyst at CFRA Research who rates Berkshire a "hold."

She said Buffett's comments show Berkshire has a positive working relationship with the trading houses.

Berkshire has also issued fixed-rate, yen-denominated bonds, but Buffett said it seeks "currency neutrality" and has no view on future currency changes.

The conglomerate on Saturday reported $1.15 billion of foreign currency gains after taxes in 2024 from non-dollar-denominated senior debt.

(Reporting by Jonathan Stempel, in New York; writing by Carolina Mandl, in New York; editing by Rod Nickel)