The 5 Japanese Giants who Love Buffett: Rentability, Stability and Opportunity

1. General Context of the Sogo Shosha and Warren Buffett Investment

Sogo shosha are large Japanese commercial conglomerates operating in a variety of sectors, ranging from energy and metals to food, technology, infrastructure and financial services. These companies have played a historic role in the Japanese economy, acting as key intermediaries in the import of resources, as Japan does not have many natural resources, and in the export of finished products. Their diversified business model and global reach make them essential actors in international supply chains.

Warren Buffett, through Berkshire Hathaway, started investing in these five companies in 2019, initially acquiring 5% of each for a total of about 6,000 million dollars. By 2025, according to recent information, Berkshire has increased its share to an average of 9.3%, with a market value of its investments reaching $23.5 billion at the end of 2024, compared to an initial cost of $13.8 billion. Buffett has expressed his intention to keep these investments in the long term, emphasizing his admiration for management practices, the allocation of capital and the approach to the shareholders of these companies.

2. Business Analysis: Solidity and Benefit margins

We will then analyze each company, its financial solidity and its profit margins, based on historical data and general trends in the sector. Since I have no access to the exact financial statements of 2025, I will use available information up to 2023 and reasonable projections based on the economic context.

ITOCHU Corporation

• Profile: ITOCHU is one of the largest shosha sogo, with textile operations, food, energy, metals, technology and more. It is known for its approach to consumer businesses and its expansion in emerging markets.
• Solidez: ITOCHU has shown efficient management and sustained growth. In 2020, it reached a historic record in the Tokyo Stock Exchange after Buffett’s investment, and its quote has remained solid. Its geographical and sectoral diversification reduces risks, and its approach to technology and sustainability (such as renewable energy projects) is well positioned for the future.
• Benefit margin: Historically, ITOCHU has had a low net profit margin, typical of sogo shosha, which operate with high volumes and adjusted margins. In 2020, its net profit margin was around 4-5%, but its return on heritage (ROE) was competitive, about 15%, higher than the average TOPIX index (8%).
• Perspective 2025: Given the ITOCHU approach in high-growth sectors such as technology and sustainability, its net profit margin is likely to remain stable or slightly improved (5-6%), driven by inflation in Japan and global demand for technological products.

Marubeni Corporation

• Profile: Marubeni operates in sectors such as food, energy, metals, infrastructure and chemicals. It has a strong presence in Asia and America.
• Solidez: Marubeni has shown resilience despite economic crises. In the last 18 years (up to 2020), he maintained an average ROE of 12%, although he recorded losses in the fiscal year 2019-2020 due to deterioration in assets. However, its dividend policy has been consistent, increasing payments on a sustained basis until that year, which is noticeable in a Japanese market where companies tend to prioritize low dividends.
• Benefit margin: Marubeni’s net profit margin has been historically low, about 2-3%, due to its exposure to volatile sectors such as energy. However, its diversification and moderate leverage make it solid.
• Perspective 2025: With global economic recovery and the diversification of Marubeni in sectors such as infrastructure and food, their profit margin could have improved to 3-4%, benefiting from inflation and the stabilization of raw materials prices.

Mitsubishi Corporation

• Profile: Mitsubishi is Japan’s largest shosha sogo, with energy operations, metals, machinery, chemicals and food. It is the core of a keiretsu (affiliated company network).
• Solidez: Mitsubishi has a dominant position in the Japanese and global market, with a strong exposure to global GDP growth. Its quote has been historically low relative to its value in books, making it attractive to value investors like Buffett.
• Benefit margin: Mitsubishi usually has a net profit margin of about 3-4%, with a ROE of 10-12%. Their focus on energy and mining projects has been profitable, though volatile.
• Perspective 2025: Japan’s inflation and Mitsubishi’s diversification in sectors such as renewable energy and technology could have raised its profit margin to 4-5%, while its ROE is likely to remain competitive.

Mitsui & Co.

• Profile: Mitsui operates in energy, metals, infrastructure, chemicals and food, with a strong presence in emerging markets.
• Solidez: Mitsui has a diversified business model and a solid free cash flow generation. Its exposure to sectors such as energy and metals makes it sensitive to economic cycles, but its long-term investment approach (such as infrastructure projects) gives it stability.
• Benefit margin: Mitsui’s net profit margin has historically been 3-4%, with a ROE of 10-11%. Its valuation, like that of its pairs, has been low, with a P/BV (value of accounting) of 0.8-1.0.
• Perspective 2025: With the recovery of raw materials prices and their sustainability approach, Mitsui could have improved its profit margin by 4-5%, maintaining a solid ROE.

Sumitomo Corporation

• Profile: Sumitomo has a long history (from the 17th century) and operates in metals, transport, infrastructure, energy and technology. Afforded by growth in technology, health and social infrastructure.
• Solidez: Sumitomo has maintained an average ROE of 11% in the last 18 years (up to 2020), exceeding the average TOPIX (8%). However, it quotes to low multiples (P/BV 0.7 and P/E 6-7), indicating an undervaluation. Its sectoral and geographical diversification gives it stability.
• Benefit margin: The net profit margin of Sumitomo has been 3-4%, with plans to maintain a ROE of 10% or more and share 30% of its profits in dividends.
• Perspective 2025: Sumitomo could have increased its profit margin to 4-5%, driven by its focus on technology and infrastructure, high-growth sectors.

3. Why did Warren Buffett get fixed on these companies?

Buffett, known for its value investment philosophy, has highlighted several reasons for its interest in these sogo shosha:

1. Infravaloration: These companies are listed at low multiples (P/BV 0.7-1.0 and P/E 6-15), far below the average Japanese market (P/BV 1.2 and P/E 15). This makes them attractive to a value investor like Buffett, who seeks to buy solid companies at discounted prices.
2. Diversification and Stability: Sogo shosha has diversified businesses both sectorally and geographically, which reduces risks. They operate similarly to Berkshire Hathaway, with a long-term investment approach and cash flow generation.
3. Friendly Practices with Shareholders: Buffett has praised its allocation of capital, management and attitude towards investors. These companies increase dividends when appropriate, recompense actions at attractive prices and have less aggressive executive compensation programs than their peers in the USA.
4. Solid Performance: Despite low profit margins, these companies generate competitive returns on heritage (ROE) (10-15%), higher than the average Japanese market. Moreover, their exposure to global GDP growth makes them less dependent on Japan’s domestic economy, which has faced decades of stagnation.
5. Macroeconomic context in Japan: Japan is coming out of decades of deflation, which has made its actions more attractive. Moderate inflation, improved corporate governance and economic reforms have driven the Japanese market, with the Nikkei index reaching historic peaks in 2023. Buffett saw an opportunity in this structural change.
6. Investment Performance: Since 2020, the shares of these companies have risen an average of 180% (up to 2023), and their value in the Berkshire portfolio has grown from 6 billion to 23.5 billion dollars by 2024. This validates Buffett’s thesis that they were a subvalued investment with long-term potential.
7. Change Neutrality: Buffett has mitigated the risk of yen fluctuations by issuing bonds called in yen, which protects the performance of its investments against the weakness of the Japanese currency.

4. How to Invest and Buy Actions of These Companies

Investing in ITOCHU, Marubeni, Mitsubishi, Mitsui and Sumitomo from outside Japan is possible, but it requires taking a few steps. The following details the process and key considerations:

Step 1: Investigate and evaluate

• Basic Analysis: Review the latest financial statements of each company (available on its official websites or on platforms such as Bloomberg or Yahoo Finance). It evaluates metrics such as P/E, P/BV, ROE, and the growth of dividends.
• Risks: Consider the associated risks, such as exposure to volatile sectors (energy, metals), weakness of the yen against the dollar, and the demographic and economic challenges of Japan.

Step 2: Choose a broker

• International brokers: You will need a broker to operate in the Tokyo Stock Exchange (TSE), where these companies are listed. Some popular options include:
  • Interactive Brokers: Offers direct access to the TSE and low commissions.
  • Charles Schwab or Fidelity: Both allow to operate in international markets, although they may have higher commissions.
  • eToro: A more accessible option for beginners, although their offer in Japanese actions can be limited.
• Requirements: Make sure the broker is regulated in your country and allows you to operate with foreign actions. Also check if you need an account with currency conversion capacity (to operate in yen).

Step 3: Identify the Tickers

Each company has a code (ticker) in the Tokyo Stock Exchange:

• ITOCHU: 8001.T
• Marubeni: 8002.T
• Mitsubishi: 8058.T
• Mitsui: 8031.T
• Sumitomo: 8053.T

Some of these companies also have ADRs (American Depositary Receipts) in US markets, which facilitates investment without operating directly in yen. For example:

• Mitsubishi (ticker: MSBHF at OTC Markets)
• Mitsui (ticker: MITSY at OTC Markets)
• Sumitomo (ticker: SSUMY at OTC Markets)

Step 4: Run the Purchase

• Currency: If you purchase directly on the TSE, you will need yen. Some brokers automatically convert your local currency (such as Euros or Dollars) to yen, but this may involve foreign exchange fees.
• Order of Purchase: Decide if you want to buy at market price (at current price) or set a limit (maximum price you are willing to pay).
• Tokyo Bag Timetable: The TSE operates from 9:00 to 15:00 local time (JST), which is equivalent to 1:00 to 7:00 CET (adjustable according to your time zone).

Step 5: Fiscal and Divisas Considerations

• Taxes: Japanese stock dividends may be subject to fiscal retention of 20.315% in Japan. Depending on your country, you could claim a tax credit for double tax treaties.
• Change Risk: The weakness of the yen against other currencies (such as the dollar or the euro) can affect your returns. Consider coverage strategies if you plan to invest in the long term.

Alternative: Investing through ETFs or Funds

If you prefer a more diversified exposure or do not want to operate directly on the TSE, you can invest in ETFs or funds that include these companies:

• WisdomTree Japan Hedged Equity ETF (DXJ): It offers exposure to Japanese stocks with exchange coverage, including several sogo shosha.
• Investment Funds: Funds such as the Polar Capital Japan Value Fund include companies such as Sumitomo Mitsui and similar ones, with a value approach.

Step 6: Monitoring and Manage

• It follows Japan’s economic news and quarterly corporate reports.
• It assesses the impact of macroeconomic factors, such as the Bank of Japan’s monetary policy, inflation and global tariffs (such as Donald Trump’s taxes, which have generated market turbulence).

5. Critical Analysis: Is Good Idea Investing in These Companies in 2025?

Points to Favor

• Solidity and Resilience: These companies have demonstrated stability over decades, with diversified business models that protect them from economic shocks. Their exposure to global growth makes them less dependent on the Japanese economy.
• Buffett Backup: Buffett’s presence is a sign of confidence. Your successful investment history (such as Coca-Cola and American Express) suggests you see a significant value in these companies.
• Inflation in Japan: Japan’s departure from deflation and moderate inflation could improve the margins of these companies, especially in sectors such as energy and food.
• Attractive Rating: Although their quotes have risen since 2020, they remain undervalued compared to the global market, with low P/E and P/BV multiples.

Points against

• Low margins: The net profit margins of the sogo shosha are structurally low (3-6%), which can discourage investors seeking high returns in the short term.
• Change Risk: The weakness of the yen against the dollar or the euro can erode the returns for foreign investors, unless coverage strategies are implemented.
• External Volatility: These companies are exposed to cyclical sectors such as energy and metals, which can be affected by trade wars, tariffs (such as Trump’s taxes) and global economic slowdowns.
• Demographic Challenges in Japan: Population ageing and slowing domestic economic growth could limit long-term growth potential, although their global exposure mitigates this risk.

Conclusion

Sogo shosha represents a robust investment option for those who align with Buffett’s philosophy: focusing on long-term value, stability and constant dividends. They are not actions for those seeking fast profits, but for investors who have the patience to endure a little volatility. Looking at 2025, with inflation in Japan and the recovery of the global economy, these companies could remain an attractive option, especially if the Nikkei continues its upward trend.

6. Final Reflection

Warren Buffett’s interest in ITOCHU, Marubeni, Mitsubishi, Mitsui and Sumitomo reflects his classic value investment approach: to buy undervalued companies with solid foundations and keep them in the long term. These sogo shosha not only meet their criteria of stability and good corporate governance, but also benefit from structural change in the Japanese economy. However, investors must be aware of the risks, such as the impact of global tariffs and the weakness of the yen.

If you decide to invest, do it with a long-term perspective, diversify your portfolio and consider strategies to mitigate the exchange risk. As Buffett has shown, patience and discipline are key to harnessing the potential of these Japanese companies.