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

Sumitomo Metal Mining

17/11/2023 05:05

By Anton Bridge and Miho Uranaka
       TOKYO, Nov 17 (Reuters) - Warren Buffett's vote of
confidence in Japanese trading houses is helping Mitsubishi Corp
 8058.T  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
 BRKa.N  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
 8001.T , Marubeni  8002.T , Mitsui  8031.T  and Sumitomo
 8053.T  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  .N225  has jumped 29% so far this year,
outperforming both the S&P 500  .SPX  and the FTSE 100  .FTSE .
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 March, 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%.
    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. 

 (Reporting by Anton Bridge and Miho Uranaka; Editing by David
Dolan and Miral Fahmy)
 ((Anton.Bridge@thomsonreuters.com;))