During his recent interview with CNBC, Warren Buffett discussed buying Japanese Trading Houses that were selling at ridiculous prices. Here’s an excerpt from the interview:
Q1 2023 hedge fund letters, conferences and more
Buffett: Well, the investments began maybe close to four years ago, and I was looking at company after company, as I do every day. And I just thought these were big companies.
They were companies that I generally understood what they did. Somewhat similar to Berkshire in that they owned lots of different interests and they were selling at what I felt was a ridiculous price, particularly the price compared to the interest rates prevailing at that time.
And so, I started buying all five of the five largest trading companies and by my 90th birthday, August 30th of 2000 – whatever it was –
Quick: ’20. 2020—
Buffett: Yeah, yeah. And we had bought just somewhat over 5% of each company, and we were buying identical amounts. So, we announced at that time that we bought this 5% interest in each of the five.
I wrote a letter to the CEOs of each of the companies saying the same thing – that we would never buy – Berkshire would never buy more than 9.9% without their consent, and that was my word. It was Berkshire Hathaway’s word. And they all welcomed us in, and their results have exceeded our expectations since we purchased the group.
I think their dividends, on average, have gone up 70% or something like that. And we now own 7.4% of each of the companies, and I just – Greg and I together, we wanted to come over and talk to them. And so, we got on a NetJets plane and plug, and flew over, and we have had a terrific time meeting each of the five sequentially over the last two days.
And it’s been fascinating, and we feel even better about – we couldn’t feel better about the investment. And over that time, we’ve sold periodically yen-denominated bonds, so more or less – we don’t do it precisely, but we’ve insulated ourselves from exchange rate changes.
So, it’s worked out very well so far, but we’ll be in these stocks ten, 20 years. I mean, we weren’t buying with the idea to next week, next month, next year. But we have had revelations about each of the companies that well, Greg and I are just fascinated by it, right?
You can watch the entire discussion here:
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Article by The Acquirer’s Multiple.
