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Berkshire Hathaway of Warren Buffett recently revealed a 5% stake in a total of $7 billion in five Japanese giants: Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo.
It is the largest of the country’s “shosha sogo”: general commercial corporations that interact in a wide variety of foreign business activities.
This diversity, from steel extraction to energy production, meat processing, aircraft portion manufacturing, store operations, genuine real estate investment and the provision of financing, consulting and logistics.
Their varied operations give them a “holistic” view of many sectors, which are exploding to expand new models, technologies and services, Mitsubishi said in its latest strategic report.
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The “big five” sogo shosha have a market capitalization of between $10 billion and $42 billion, annual revenues of $48 billion to $136 billion and profits ranging from $4.9 billion in net profit to a net loss of $1.8 billion, according to Sentieo, a website.
Your inventory costs have fallen by an average of 7% this year, and everyone (Itochu) is listed below the value of your eBook, meaning your market capitalization is lower than your assets.
However, it is difficult for investors to know if corporations are undervalued, Maria Nikishkova, a study analyst at Fidelity International, told Business Insiders Maria Nikishkova.Return on investment times vary from corporate to corporate and it’s difficult to assess your overall threat profile, he said.
Furthermore, their large number of joint ventures means that they do not have complete control over their operations, that their investments in the final stage have limited accumulation and their earnings can be volatile, Nikishkova said.
They have also been forced to repay some assets due to currency crises, pressure on commodity costs and low interest rates, he added.
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Buffett’s resolve to bet on them is an “interesting development,” Nikishkova said. This most likely reflects his signature strategy of buying corporations that operate under their intrinsic values, he continued.
The outstanding investor may also be due to his increase in concentration on judicial capital allocation, liquidity generation and accumulation of profitability for shareholders through dividends and acquisitions, Nikishkova added.
Other key points may simply be the similarities between Berkshire and sogo shosha, and the perspective of collaboration, he said.
Berkshire owns many corporations, including See’s Candies, Geico, PacifiCorp and BNSF Railway, and holds large stakes in Apple, Bank of America, Coca-Cola and state-owned enterprises.
If you invest or form joint ventures with Japanese giants, the price of sogo shosha may simply rise, “making Buffett’s access point very attractive,” Nikishkova said.