Greg Abel used a Tokyo stage on Wednesday to make what amounts to a generational promise. Berkshire Hathaway’s chief executive said the conglomerate intends to hold its stakes in Japan’s five biggest trading houses for decades, describing the positions as a “long-term investment that we want to hold for decades.” He dangled the prospect of rising earnings at Mitsubishi, Itochu, Mitsui, Sumitomo and Marubeni, along with the possibility of fatter dividends and share buybacks at those companies.
The comments landed with immediate force in Tokyo. Mitsubishi shares jumped as much as 4.5 percent, touching their highest level since May, while Sumitomo, Mitsui, Itochu and Marubeni each advanced more than 2.5 percent in the Topix index on the day of Abel’s remarks. Abel is also exploring whether to enlarge Berkshire’s holdings beyond the current threshold of roughly 10 percent in each of the five houses, and has been sounding out potential joint ventures and mergers with the trading groups on a global scale.
A Portfolio Increasingly Defined by Concentration
The Japan commitment is only half the story of how Berkshire’s capital is being redeployed. The conglomerate’s public equity portfolio has become more top-heavy than it has been in years, with five positions now accounting for 63 percent of invested assets. Alphabet has climbed to the third-largest holding — behind Apple and American Express, but ahead of Coca-Cola and Bank of America — after Berkshire added roughly 106 million Class A and C shares during the second quarter, a stake worth about $36.6 billion. The entire publicly traded equity book stood at nearly $360 billion as of September 1.
That reshuffling is more than a single stock pick. Berkshire trimmed its Bank of America position in the second quarter while pouring money into Alphabet, a rotation that analysts have read as part of a broader, contrarian-minded deployment of capital under Abel. Additions at Delta, D.R. Horton, Lennar and Macy’s fit the same pattern.
The shift marks a clear departure from the recent past. After fourteen consecutive quarters of selling more stock than it bought, Berkshire flipped to net buyer in the second quarter, with net purchases of roughly $20 billion. Over the first half, buys totaled $39.4 billion against sales of $27.8 billion.
Operating Results Tell a Two-Sided Story
The portfolio side of the ledger is one of expansion, but the operating businesses present a more mixed picture. Operating earnings rose to $12.98 billion in the second quarter from $11.16 billion a year earlier, lifted by gains in manufacturing, services and retail, along with stronger results at Berkshire Hathaway Energy and the BNSF railroad. The manufacturing, service and retail segment grew 24 percent to $4.47 billion, BHE advanced 27 percent to $891 million, and BNSF contributed $1.56 billion, up 6 percent.
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Insurance was the laggard. Underwriting income fell 13 percent to $1.73 billion, while investment income from the insurance operation slipped 9 percent to $3.06 billion. That divergence between a sturdy core and a softening insurance arm tempers some of the optimism around the Alphabet purchases.
The Cash Mountain Begins to Melt
Berkshire’s famed cash reserves are no longer growing. The hoard stood at $365.5 billion at the end of the second quarter, down from a record $397.4 billion three months earlier. Part of the drawdown reflects the closing of the Taylor Morrison acquisition, which Berkshire bought for $72.50 per share in cash — an equity value of roughly $6.8 billion and an enterprise value of about $8.5 billion. Share repurchases also accelerated, with $4.5 billion spent in the quarter versus just $235 million in the first.
What the Market Makes of It All
For all the strategic movement, the stock itself has been subdued. Shares closed Friday at EUR 653,500.00, down 0.3 percent on the day, and have slipped 3.0 percent over the past month. The shares still sit about 10 percent above their 52-week low of EUR 592,500.00, and roughly 4.7 percent below the 52-week high of EUR 686,000.00 reached on August 10. Year to date, the stock is up 2.6 percent.
The muted reaction suggests investors are treating the portfolio concentration and the Japan pledge with caution rather than enthusiasm. The growing weight of just five holdings introduces a concentration risk into a conglomerate otherwise known for diversification, and whether Abel’s more active capital deployment marks a durable break from his predecessor’s restraint is the question Berkshire holders will be weighing in the quarters ahead.
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