Berkshire Hathaway has no plans to sell Japan’s trading firms, despite their tariff troubles

Berkshire Hathaway has no plans to sell Japan’s trading firms, despite their tariff troubles

Berkshire CEO Warren Buffett and vice chair Greg Ael once again endorsing Japanese trading houses at the company’s annual shareholders meeting in Omaha saying they could hold them quote forever. Take a listen. And I think the thing we’re building with the five five companies is one, it’s it’s been a very good investment, but we are really, as Warren touched on, we we envision holding the investment for 50 years or or forever, but I think we also are building relationships to do incremental things with each of those companies. And we really do hope to do big things with them uh globally. They bring different perspectives and different opportunities. And we see and that’s the uh that’s why we’re building that long-term relationship with them. And we’ve got Lynn to sort of walk us through all this. And you know then these top trading houses are expecting significant hits to their earnings this year due to obviously tariff related uncertainty but Berkshire Hathaway could hold them forever. Yeah, indeed Sherry, we did get Q4 earnings from the big five trading houses or soas on Thursday and Friday last week. But also keeping in mind that at that shareholders meeting, Warren Buffett was asked about that recent market volatility off the back of the so-called liberation day tariff announcement and he didn’t seem fussed because he’s in it for the long run uh looking at value and longerterm investments here. But as far as what we got from the earnings and particularly the outlook, we had one of the CEOs from Sumitomo basically calling the current set of situ current set of circumstances unprecedented. And we have Sumitomo for the first time including in its outlook a 40 billion yen buffer to take into account the impacts of the tariffs. Also Marubeni adding a 30 billion yen buffer. Itchu didn’t call it as such but basically flagged 40 billion yen for that potential impact on the global economic environment as well in terms of FY26 earnings outlook. It was a mixed picture. It was the trading houses that are most exposed particularly to the commodity cycle. So Mitsubishi and Mitsui they are expecting their net profit to fall for a third consecutive year. But still Sherry though and I think this is something that Warren Buffett also highlighted as well. These companies are very cashrich as well and they are still announcing big buybacks as well as dividends to come. Yeah. And I wonder, this gets a bit technical for me, but Warren Buffett, the way he financed these deals, these investments was through low cost yen bonds and definitely benefiting from the near zero interest rate environment in Japan at the time of him going in. I wonder indeed not only with the change of guard at Borcher Hathaway but you know if the yen changes can he still lock down these attractive uh ways of funding these investments? Well I think that’s a really interesting point that you raised there but keep in mind that the interest rate in Japan is still at 0.5%. So it is still extremely extremely low. So that is something that they’ve taken advantage of uh in terms of the yen denominated bonds. Uh and you know we know that as recently as I believe a couple of months ago uh they were issuing new yen denominated bonds as well. So this is something that a lot of analysts are keeping their eyes on you know whether or not we’re going to see an increase in the stakes in these trading houses. Uh there’s certainly some analysts who are also on the lookout that could also uh Burkshshire Haway look uh wider as well across other Japanese companies. You know Lynn I know you I know you’ve been crunching numbers on these Soo Shosha uh right in terms of the sort of traditional metrics that folks look at uh investors look at whether it’s price earnings price to book return on equity how how do they shape up? M yeah so that’s where the value comes in because if you look at the latest numbers that I’ve been able to get from uh the database refinitive um if you look at price to earnings or price to book on average those five trading houses are looking at uh you know around under 12 for the PE ratio around one for the price to book. So this is significantly lower versus if you look at the average on the S&P 500 in the United States. So this is still suggesting a big discount versus fundamentals here. And this is something that I think Warren Buffett, you know, during that shareholders meeting, he’s talking about going through some Japanese company handbook, looking through the companies, and when he found these trading houses, they started looking at the balance sheets and they they thought they, you know, hit the jackpot in a way in terms of what they were looking for uh and what these companies provided as Yeah, it’s probably like an OMG moment for uh for Warren and his buddies,

Berkshire Hathaway endorses Japan trading houses