What common characteristics do these five companies share that lead Warren Buffett to view them as a cohesive entity?

Analysis of Common Traits Among Buffett's Five Japanese Trading House Investments

Warren Buffett, through Berkshire Hathaway, invested in Japan's five major trading houses (Sogo Shosha): Itochu Corporation, Marubeni Corporation, Mitsubishi Corporation, Mitsui & Co., and Sumitomo Corporation. In his 2020 shareholder letter, Buffett stated that he views these companies as "a whole," primarily because they share the following key commonalities aligning with his investment strategy (emphasizing long-term value, diversified risk, and resilient business models):

1. Similar Business Model: The Essence of Sogo Shosha

These companies are traditional Japanese "Sogo Shosha," originating from entities like the Mitsui family during the Edo period, evolving into global trading and investment giants.
Rather than specializing in a single sector, they operate across diverse fields including energy, metals, chemicals, food, textiles, machinery, infrastructure, and financial services.
Collective role: Functioning as an "economic ecosystem," they connect global resources and markets through trade, investment, and supply chain management. This led Buffett to perceive them as complementary entities rather than isolated ones.

2. Low-Risk, High-Stability Cash Flows and Dividends

All five are renowned for stable cash flows and generous dividends. Buffett highlighted their resemblance to "perpetual bonds," offering reliable dividend yields (averaging ~4–5%).
With histories dating back to the 19th century, they have weathered multiple economic cycles, demonstrating resilience (e.g., post-WWII reconstruction and the global financial crisis).
Common traits: Low debt ratios, conservative financial strategies, and risk diversification through global networks to mitigate volatility in single markets or industries.

3. Globalized and Diversified Portfolios

These trading houses maintain extensive global investment and partnership networks, participating in projects like mining, energy (e.g., Australian coal mines, LNG ventures), and consumer goods (e.g., Itochu’s FamilyMart convenience stores).
Buffett treats them as "a whole" due to portfolio complementarity: If one excels in energy, another may lead in agriculture or technology, collectively forming a balanced "investment basket."
This aligns with Buffett’s "moat" theory: Their network effects and informational advantages create competitive barriers difficult to replicate.

4. Attractive Valuations and Long-Term Growth Potential

At the time of investment, these companies traded at low P/E ratios (~5–10x), significantly below U.S. peers, providing a "margin of safety."
Buffett believed they were undervalued by the market but would appreciate long-term alongside Japan’s economic recovery and global trade growth.
Holistic view: Buffett holds ~8–9% stakes in each (evenly distributed), treating them as a single asset class—similar to his Apple or Coca-Cola investments—but prioritizing collective stability.

Buffett’s Investment Insight

The core reason Buffett views them as "a whole" is risk diversification and synergy: Individually, each company may face volatility, but together they mirror a diversified "snapshot of the Japanese economy," delivering steady returns rather than speculative high growth. This embodies his strategy—buying quality businesses, holding long-term, and ignoring short-term market noise. In 2023, Buffett further increased his stakes to ~9%, reinforcing this conviction.

Through this lens, these trading houses transcend mere commerce; as global business "connectors," they represent assets worthy of perpetual ownership.