Warren Buffett's stamp of approval helps Japan's Mitsubishi shed conglomerate stigma

  • Reuters
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Warren Buffett's stamp of approval helps Japan's Mitsubishi shed conglomerate stigma
Credit: © Reuters.

By Anton Bridge and Miho Uranaka

TOKYO (Reuters) -Warren Buffett's vote of confidence in Japanese trading houses is helping Mitsubishi Corp overcome long-held investor wariness about its complex global business that covers everything from sausages to natural gas , a top executive said.

Japan's largest trading house has seen heightened interest from potential investors since Buffett's Berkshire Hathaway (NYSE: BRKa ) took a stake in 2020 that it later increased, Kenji Kobayashi, Mitsubishi's chief stakeholder engagement officer, told Reuters.

"Until fairly recently, being an industrial conglomerate had negative connotations," Kobayashi said in an interview. "More people will come to meet a company Berkshire has invested in. The hurdles have come down significantly."

The Berkshire investment in Mitsubishi and rivals Itochu, Marubeni, Mitsui and Sumitomo has also focused global attention on Japanese stocks in general and coincided with a push by the Tokyo Stock Exchange for improved use of capital that has seen companies boost dividends and buy back shares.

The result has put Japanese equities soundly back in fashion for the first time in years, as investors bet that more companies are serious about improving governance and returns.

The Nikkei has jumped 29% so far this year, outperforming both the S&P 500 and the FTSE 100 . Tellingly, the index has also hit its highest since 1990 - near the peak of the asset bubble when Japan was still a more dominant force in the global economy.

Attitudes about the need to engage with external stakeholders - including investors - are now changing rapidly in Japan, at least among larger firms, Kobayashi said, highlighting how Japan Inc has become less insular in recent years.

GOING DIRECT

Mitsubishi is now reaching out directly to overseas investors, something it used to outsource to brokerages. It met with some 100 foreign investors in the past half a year, Kobayashi said, double the number from last year.

"We're taking an active targeted marketing approach, particularly towards foreign investors," he said.

Appointed as the trading house's first chief stakeholder engagement officer in April, Kobayashi is now focused on wooing investors who focus on growth, not just value.

Berkshire, synonymous with the philosophy of value investing that Buffett studied at Columbia University under Benjamin Graham, said in June it increased its stakes to average more than 8.5% in the five trading houses.

Berkshire first announced roughly 5% stakes in August 2020, with Buffett saying the trading houses "have many joint ventures throughout the world and are likely to have more".

Since then Mitsubishi's share price has more than trebled, when dividends are included, although that's still slightly behind top performer Mitsui, which has returned 237%, according to LSEG data. The Nikkei has returned 54%.

The trading houses are "a cross-section of not only Japan, but of the world", Buffett told the Nikkei newspaper in April, adding they were "similar to Berkshire".

© Reuters. Mitsubishi Corp's Chief Stakeholder Engagement Officer Kenji Kobayashi speaks about his role at Mitsubishi's office in Tokyo, Japan, November 16, 2023. REUTERS/Anton Bridge

Still, Mitsubishi is trading at a price-to-book ratio of just a little over 1, or at almost no premium to the value of its assets.

"We have yet to make the case for our growth potential to the market," Kobayashi said.

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