Warren Buffett Reveals 'Confounding' Fact That Made Him Invest In Japan's Top 5 Trading Firms: 'Better Than I Thought'

Zinger Key Points
  • Buffett says the five Japanese trading companies he has stakes in have earnings yields around 14%, with dividends growing 70%.
  • He says he would stay invested in these companies for long, say 10 to 20 years.

Billionaire investor Warren Buffett said in an interview with Nikkei on Tuesday that he was proud of his investments in shares of Japanese trading houses.

In his appearance on CNBC’s Squawk Box on Wednesday, he elaborated further on the logic behind his Japanese bets.

What Happened: Buffett’s agreed that his investment in Japanese stocks reflects his stamp of approval in Japan. This was accurate a couple of years ago too, he said.

“I was confounded by the fact that we could buy into these companies and in effect have earnings yield, maybe 14% or something like that, with dividends….. that grew 70% during that time and people were investing money at quarter percent or nothing, and then the quarter percent, if they put it out for a year, it wasn’t going to grow,” the billionaire said.

“It's sure gonna be better than I thought it would be."

See Also: Warren Buffett's Forex Strategy

Tracing Back Investment History:  Buffett told CNBC that the investment in the Japanese trading houses started about four years ago.

“I was looking at company after company, as I do every day and I just thought these were big companies. These were companies that I generally understood what they did, somewhat similar to Berkshire Hathaway, Inc. (NYSE: BRK-A) (NYSE: BRK-B)," the billionaire investor said.

These stocks were trading at “ridiculous” prices, compared to the interest rates that prevailed at that time, he said.

Buffett said he, therefore, started buying all five largest trading houses during his 90th birthday (Aug. 30, 2020). The five trading companies Berkshire has stakes in are:

  • Itochu Corp. ITOCY
  • Mitsubishi Corp. MSBHF
  • Mitsui & Co., Ltd MITSY
  • Sumitomo Corp. SSUMY and
  • Marubeni Corp. MARUY

Berkshire picked up an identical 5% stake in each of these companies and Buffett wrote to the CEOs of the companies at that time that he would never buy more than 9.9% in each without their consent.

Since Berkshire’s purchases, the dividends of these companies have, on average, gone up by about 70%, he noted.

The investment guru also said Berkshire now owns 7.4% of each of these companies. He also said during his Japanese visit, he met with each of these companies over the past two days.

Buffett said these stocks are long-term bets. “We'll be in these stocks 10-20 years,” he said.

Read Next: Did Warren Buffett Miss Tesla Train At Bargain $200M Valuation? Elon Musk Reminds Investment Guru Of Lost Opportunity

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