Do they conduct share buybacks? Why does Warren Buffett favor companies that repurchase their own shares?

Have they conducted stock buybacks?

Yes, the five major Japanese trading houses invested in by Buffett—Mitsubishi Corporation, Itochu Corporation, Mitsui & Co., Sumitomo Corporation, and Marubeni Corporation—have all conducted stock buybacks in recent years. As large Japanese conglomerates, driven by Buffett's investment and Japan's corporate governance reforms, these companies actively use share repurchases to enhance shareholder value. Specific details are as follows:

Mitsubishi Corporation: Announced multiple buyback programs in recent years. For example, in 2023, it repurchased shares worth hundreds of billions of yen to optimize its capital structure and return value to shareholders.
Itochu Corporation: Actively conducted buybacks, repurchasing significant amounts of shares between 2022 and 2023, combined with its dividend policy to boost shareholder returns.
Mitsui & Co.: Has a stable history of buybacks. In 2023, it announced a repurchase of approximately ¥100 billion worth of shares to increase earnings per share.
Sumitomo Corporation: Also engaged in buybacks, repurchasing shares worth hundreds of billions of yen in 2023, emphasizing capital efficiency.
Marubeni: Frequently conducted buyback activities in recent years. In 2023, it repurchased around ¥50 billion worth of shares to support its share price and optimize its balance sheet.

These buybacks often occur when the stock price is undervalued, aligning with Buffett's investment philosophy. They help reduce the number of shares outstanding, increase per-share value, and demonstrate shareholder-friendly financial strategies.

Why does Buffett favor stock buybacks so much?

Warren Buffett, a master of value investing, strongly favors stock buybacks, especially when a company's stock price is below its intrinsic value. He views buybacks as an efficient form of capital allocation. The main reasons are:

Increases Shareholder Value: If a company's stock is undervalued by the market, buying it back is equivalent to purchasing it at a discount. This reduces the number of shares outstanding, thereby increasing earnings per share and the ownership stake for remaining shareholders. It resembles the investment principle of "buying low and selling high."
More Flexible Than Dividends: Buybacks are less rigid than dividends and carry no tax burden for shareholders (dividends are taxable). Shareholders can choose whether or not to sell their shares, allowing for more personalized returns.
Signals Positive Market Information: A buyback signals that management believes the stock is undervalued and has confidence in the company's prospects, which can boost investor sentiment and the share price.
Efficient Use of Excess Cash: Buffett emphasizes that companies should deploy excess cash towards the highest-return opportunities. If no better investment projects exist, buybacks are superior to inefficient expansion or hoarding cash.
Long-Term Value Orientation: At Berkshire Hathaway, Buffett himself actively repurchases shares (e.g., repurchasing tens of billions of dollars since 2020), demonstrating his belief that buybacks create value for long-term shareholders rather than being short-term stock price manipulation.

In summary, Buffett favors buybacks because they embody the core principle of rational capital allocation: repurchasing shares only when the price is below intrinsic value genuinely creates wealth for shareholders. This aligns perfectly with his investment strategy of seeking undervalued, high-quality companies.