This is Zack Fuss. Today we are breaking down the Mitsubishi Corporation. In Japan, the business model of a trading company is prominent. The big five trading companies caught the attention of global investors in 2020, when Berkshire Hathaway disclosed a major stake in all of them: Mitsubishi, Mitsui, Itochu, Marubeni, and Sumitomo. Today's Berkshire stake is nearly 10%.
I'm joined by Krishna Mohanraj, a Portfolio Manager at Diamond Hill Capital Management. In this episode, we discuss how the rich history of trading houses is steeped in Japanese culture and how each differs from one another. Krishna helps unravel the evolution of stakeholder priorities and how capital allocation policies have changed in the Japanese capital markets. Please enjoy this Breakdown of Mitsubishi Corporation.
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Show Notes
(00:00:00) Welcome to Business Breakdowns
(00:03:12) First Question - Understanding Mitsubishi's Global Impact and Business Model
(00:07:12) The Evolution of Mitsubishi and Japanese Trading Houses
(00:12:12) Mitsubishi's Investment Case and Market Position
(00:15:02) Comparing Mitsubishi with Other Japanese Trading Houses
(00:18:22) The Secret to Mitsubishi's Success and Global Network
(00:21:16) The Relevance of Berkshire’s Investment in the Japanese Trading Houses
(00:26:45) A Cultural Shift in the Orientation of Japanese Businesses Towards Their Shareholders
(00:28:35) Valuing Mitsubishi
(00:31:05) Reinvesting in The Business And Reallocating Capital
(00:33:02) Mitsubishi’s Unique Management Dynamic
(00:38:54) Advantages of the Mitsubishi Group
(00:42:44) Lessons Learned from Mitsubishi
Business Breakdowns