Berkshire Hathaway CEO Greg Abel reaffirms support for Japanese trading houses

Warren Buffett spent decades telling investors that his favorite holding period is “forever.” His successor appears to have gotten the memo.

Greg Abel, who took the reins as Berkshire Hathaway’s CEO, used a CNBC interview to double down on the conglomerate’s commitment to five Japanese trading houses, with stakes now exceeding 10% in each company. The investments, which started as roughly 5% positions during 2019-2020, have more than doubled in value and now represent a cornerstone of Berkshire’s international diversification strategy.

A $13.8 billion bet on Japan’s old guard

Berkshire’s Japanese portfolio spans five of the country’s most prominent trading conglomerates: Itochu, Marubeni, Mitsubishi Corp, Mitsui & Co., and Sumitomo Corp. Together, the aggregate investment has reached roughly $13.8B.

Abel indicated that these holdings could be maintained “for many decades,” language that would make Buffett proud. The positions have generated hundreds of millions in annual dividend income, turning what initially looked like a contrarian play into one of Berkshire’s most productive international bets.

Each of the five companies approved Berkshire’s stake increase above the 10% threshold. The approvals signal that these trading houses view Berkshire not as an activist threat but as a patient, aligned partner.

Rising yields, unfazed investor

One question hanging over Japanese markets has been the surge in bond yields. The country’s 10-year government bond yield recently hit multi-decade highs just above 3%, a seismic shift for a nation that spent years mired in near-zero or negative rate territory.

Abel reported that rising yields do not pose a significant issue for the trading houses, suggesting their business models and balance sheet strength can absorb the shift.

Why Abel is going bigger, not smaller

The decision to increase rather than trim stakes tells a story about how Berkshire views the global investment landscape right now. With roughly $13.8B committed to Japanese trading firms, Abel is signaling that these positions deserve the same strategic weight as Berkshire’s marquee US holdings.

A portfolio that has more than doubled in value while simultaneously throwing off hundreds of millions in annual dividends is the kind of compound return machine that Berkshire’s investment philosophy was built around. Abel’s expectation of continued earnings growth, increased dividends, and share buybacks from these companies suggests he sees a virtuous cycle ahead.

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