Will Buffett's Successor Continue to Maintain and Increase This Investment?

Outlook for Berkshire Hathaway's Successors on Investments in the Five Major Trading Houses

Background

Under Warren Buffett's leadership, Berkshire Hathaway has significantly invested in Japan's five major trading houses—Itochu, Mitsubishi Corporation, Mitsui & Co., Sumitomo Corporation, and Marubeni—since around 2020. Buffett views this as a long-term value investment, emphasizing these companies' diversified businesses, stable dividends, and global influence. To date, Berkshire holds approximately 8-9% stakes in each firm and continues to increase its positions, reflecting Buffett’s classic strategy: buying quality businesses for the long haul.

Succession Plan

Buffett has clearly designated his successors:

• Greg Abel: Oversees Berkshire’s non-insurance operations and is viewed as the primary successor. Known for pragmatic management and a long-term perspective.
• Todd Combs and Ted Weschler: Manage the investment portfolio. Both deeply influenced by Buffett, they excel in value investing.

Berkshire’s governance emphasizes continuity. Buffett has repeatedly stated that successors will inherit his philosophy: focusing on fundamentals, avoiding short-term speculation, and pursuing compound growth. This foundation supports the continuity of the trading house investments.

Will Successors Maintain and Increase Holdings?

Based on current information:

• High Probability of Maintenance:

  • The investments align with Buffett’s "moat" theory: These firms operate in energy, resources, trading, and other sectors with anti-cyclical resilience and high dividend yields (average ~4-5%). Successors like Abel and Combs have participated in these decisions and publicly endorsed their value.
  • Berkshire holds ample cash reserves (over $100 billion), while the trading houses’ stocks remain relatively undervalued (P/E ratios ~8-10x), creating opportunities to increase stakes. Berkshire’s repeated additions in 2023 demonstrate strategic continuity.
  • Governance mechanisms ensure successors won’t drastically deviate from Buffett’s style; at shareholder meetings, he emphasized, "Don’t fix what isn’t broken."

• Potential for Increased Holdings:

  • Positive Catalysts: Favorable JPY exchange rates, Japanese economic recovery, or business expansion (e.g., green energy transition) may prompt additions. Combs has expressed optimism about Asian market diversification.
  • Risks: Geopolitics (e.g., U.S.-Japan trade friction), global inflation, or profit volatility could induce caution. However, Buffett’s contrarian approach makes successors unlikely to sell hastily.
  • Uncertainty: Successors may fine-tune strategies (e.g., increasing tech or emerging market exposure), but the trading houses’ status as core holdings suggests an over 80% probability of short-term maintenance (per analyst consensus).

Conclusion

Overall, Buffett’s successors are highly likely to maintain and moderately increase these investments to uphold Berkshire’s core strategy and shareholder value. Investors should monitor annual reports and shareholder meetings for updates. Nevertheless, shifting market conditions may impact final decisions; individual risk tolerance should be considered.