What defines the ultimate success of this investment? Is it the doubling of stock price or the strategic partnership between Berkshire and the trading company?

Warren BuffettInvestment Success CriteriaStock PerformanceStrategic PartnershipBerkshire HathawayTrading HousesBuffett's Investment in the Five Major Trading Companies
Created At: 8/6/2025Updated At: 8/17/2025
Answer (1)

How Will the Ultimate Success of This Investment Be Defined?

In Warren Buffett's investment philosophy, the success of Berkshire Hathaway's investment in Japan's five major trading houses (Itochu, Mitsubishi, Mitsui, Sumitomo, and Marubeni) is not solely defined by short-term stock performance, such as a doubling of share prices. As an advocate of value investing, Buffett prioritizes long-term value creation, fundamental improvements, and strategic collaboration opportunities. The analysis below examines multiple perspectives:

1. Stock Performance vs. Long-Term Value

  • Limitations of Stock Doubling: Short-term stock surges may stem from market sentiment, macroeconomic trends, or speculative factors, but these are not Buffett’s core criteria. He has stated that investment success should be based on the growth of a business’s intrinsic value, not market price fluctuations. For example, when investing in the trading houses in 2020, Buffett emphasized their high dividend yields and global business diversity over short-term capital gains.
  • Actual Performance: While the trading houses’ stock prices have risen since the investment (some doubling), Buffett’s shareholder letters focus more on dividend returns and business resilience than on stock prices themselves.

2. Priority of Strategic Collaboration

  • Buffett’s Strategic Vision: Success is more likely defined by deep collaboration between Berkshire and the trading houses. Buffett has repeatedly noted that these companies resemble Berkshire’s own "conglomerate model" and expressed interest in exploring joint investments or operational synergies. Examples include:
    • Potential collaboration in energy, resources, trade, and global supply chains.
    • During his 2023 visit to Japan, Buffett emphasized long-term partnerships, which could lead to cross-border projects like infrastructure or renewable energy investments.
  • Why Collaboration Matters More: This aligns with Buffett’s "hold forever" strategy, generating sustainable compound returns rather than one-time stock gains. Collaboration also amplifies Berkshire’s global reach and aids diversification.

3. Comprehensive Metrics for Investment Success

  • Buffett’s Definition: Ultimate success hinges on long-term growth in business value and the realization of mutually beneficial partnerships. If strategic collaborations unlock new opportunities or boost Berkshire’s return on assets (e.g., through joint acquisitions or market expansion), this would far outweigh the significance of stock appreciation.
  • Risks and Opportunities: Stock volatility could reverse due to yen fluctuations or geopolitics, but strategic partnerships provide a buffer, creating a "moat." Conversely, if collaboration fails, reliance on stock gains alone would reflect opportunism—not success in Buffett’s style.

In summary, for this investment, strategic collaboration is more likely to define success, as it embodies Buffett’s principle of "buying businesses, not stocks." Investors should monitor Berkshire’s future shareholder letters and partnership announcements to gauge genuine progress.

Created At: 08-06 12:38:15Updated At: 08-09 22:20:42