Warren Buffett's endorsement boosts Mitsubishi's image, easing conglomerate stereotypes in Japan
17 Nov 2023
Mitsubishi Corp., Japan's largest trading house, is experiencing a positive shift in investor sentiment, thanks to Warren Buffett's resounding vote of confidence. The Oracle of Omaha's Berkshire Hathaway initially took a stake in Mitsubishi in 2020, subsequently increasing its investment, which has led to increased interest from potential investors, according to Kenji Kobayashi, Mitsubishi's Chief Stakeholder Engagement Officer.
Kobayashi highlighted the changing perception of industrial conglomerates, stating that, until fairly recently, being an industrial conglomerate had negative connotations. He mentioned that more people would come to meet a company Berkshire has invested in and added that the hurdles had come down significantly.
Buffett's investments in Mitsubishi and its competitors, including Itochu, Marubeni, Mitsui, and Sumitomo, have not only bolstered confidence in these trading houses but have also drawn global attention to Japanese stocks. This coincides with the Tokyo Stock Exchange's push for enhanced capital utilization, resulting in companies boosting dividends and repurchasing shares.
The positive momentum has propelled Japanese equities back into the spotlight, with the Nikkei surging 29% year-to-date, outperforming the S&P 500 and the FTSE 100. Notably, the index has reached its highest point since 1990, reflecting a renewed interest in Japanese companies, reminiscent of the asset bubble era.
Kenji Kobayashi emphasized the shifting attitudes within Japan Inc. regarding engagement with external stakeholders, including investors, signaling a departure from the country's traditionally insular approach. As evidence of this change, Mitsubishi is now directly reaching out to overseas investors, a task that was previously outsourced to brokerages. Over the past six months, the company has engaged with approximately 100 foreign investors, double the number from 2022.
In his role as Mitsubishi's first Chief Stakeholder Engagement Officer, appointed in April 2023, Kobayashi is focusing on attracting growth-oriented investors. Berkshire's investment, synonymous with the value investing philosophy, has played a pivotal role in reshaping Mitsubishi's trajectory. Berkshire increased its stakes to average more than 8.5% in the five trading houses, endorsing the companies' potential for joint ventures worldwide.
Since Berkshire's initial announcement of roughly 5% stakes in August 2020, Mitsubishi's share price has more than tripled, factoring in dividends, although slightly trailing behind top performer Mitsui, which has returned an impressive 237%, according to LSEG data. The Nikkei has returned 54% over the same period. Despite the remarkable performance, Mitsubishi is currently trading at a price-to-book ratio of just over 1, indicating almost no premium to the value of its assets.
Kobayashi commented that they had yet to make the case for their growth potential to the market. He underscored the company's determination to further articulate its growth story to investors in the evolving landscape of Japanese corporate engagement.