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August 30, 2020. Warren Buffett turned ninety.
That morning Berkshire announced it had bought five percent of each of Japan’s five great trading houses. Mitsubishi. Mitsui. Itochu. Marubeni. Sumitomo. Companies that have run Japan’s commerce for a hundred years.
Berkshire had more cash than most countries. But he borrowed six billion dollars, in yen, at a fixed rate of half a percent. The five companies paid dividends of around seven percent. He pocketed the difference before a single share moved. If the yen collapsed, his shares would be worth less in dollars, but so would his debt. Perfectly hedged.
Then the shares moved.
Berkshire invested $13.8 billion in these Japanese companies. Today, those shares are worth around $44 billion. Plus dividends. Berkshire now owns close to ten percent of each company and Abel says the plan is to hold them “for 50 years or forever.”
How did he find them? Buffett told the story himself at last year’s annual meeting.
“I was just going through a little handbook. It probably had two or three thousand Japanese companies in it. And here were these five trading companies. They were selling at ridiculously low prices.”
A ninety year old man with a handbook, turning the pages. That is why this post exists. But what did Buffett see in them?
Buffett bought cannibals
Buffett’s Japan bet has little to do with currencies. Read his 2024 letter and he tells you what he actually bought.
“Each of the five companies increase dividends when appropriate, they repurchase their shares when it is sensible to do so.”
He bought cannibals.
I run a site called Buyback Radar. It reads every annual report a Japanese company has filed since 2016 and counts one thing. How many shares exist at the end of each year, and how many existed before. So I pulled Buffett’s five.
Mitsubishi has reduced its share count by twenty-two percent, Mitsui by nineteen percent, Itochu by eleven percent. Marubeni six. Sumitomo four.
Then I looked at where Mitsubishi sits on my list.
Number 64.
Sixty three Japanese companies retired a bigger share of themselves than Mitsubishi did. Forty six of the hundred retired a quarter of themselves or more. The company in hundredth place retired eighteen percent.
Buffett found five. The list has a hundred, and most of them retired more of themselves than the ones he bought. This is the top of it.
Number three on that list. Sankyo makes pachinko machines. Pachinko is Japan’s pinball gambling habit. In 2017 Sankyo had 406 million shares. Today it has 199 million shares. Half the company is gone. The stock is up 270 percent since 2017, dividends included, and it still trades at nine times earnings with a five percent dividend and almost half its market value in cash.
A screener will not show you this. Japanese companies park the shares they buy back in the treasury, sometimes for years, before they cancel them. A screener reads the issued count and sees a company that never shrank. We count every share a company holds against itself, from its own annual report, one filing at a time. That is why this list took ten years of reports and not a database query, and why most of these hundred show up on no screen anywhere.
That is Sankyo on Japan Radar. The blue line is the share count. The white line is the price. Every one of the hundred has a page like this.
The Japan risk
Japan is cheap for a reason.
The country loses close to nine hundred thousand people a year, births minus deaths. A nation that keeps shrinking will eventually produce less, and the stock market will notice. Growth has to come from exports, because there will not be more customers at home. And every company in Japan is fighting for workers, which pushes wages up and margins down.
Many of these hundred are small. You will not get in or out of some of them in a hurry. Some of them buy back shares because they have nothing better to do with the cash. No growth, no ideas, a shrinking share count on a shrinking business. The list ranks what was retired. It does not tell you why. That part is the work. And the yen can fall. Buffett hedged that. You probably will not.
At that same meeting Buffett said something else.
“I’d rather have a hundred billion than 20 billion. But size is an enemy of performance at Berkshire.”
I invest the way Buffett invests, with one difference. He has to buy things the size of Mitsubishi. I do not. So I go where he cannot. Small, hated, ignored companies that nobody writes about and that hand everything back to shareholders. Coal. Offshore drillers. Salvage yards. Pachinko machines. Printers.
I do not own a Japanese stock yet. I have a feeling there might be some very interesting opportunities hiding in Japan. Now that Japan Radar is finished, I plan to dig deeper and see if I can find a handful of Japanese cannibals worth investing in.
After all, I would rather fish where there are plenty of fish, but not too many fishermen. And that is exactly why I built Buyback Radar in the first place.
Buyback Radar started as a free list of American cannibals. 467 companies, every 10-K since 1999, rebuilt every Monday. That part stays free. Always. I have to admit, the first version had a little “hair on it.” This is what the hair looked like in the beginning.
But now we’ve taken it to a whole new level. Japan, 100 companies, ten years of annual reports, translated into dollars. Europe, 100 companies from 17 countries. Canada, 98. Each one checked by hand against its own annual report.
Every company gets one page. The share count falling and the share price, on one chart. One sentence on what it does. Ten years of the balance sheet cut to the lines that matter. Revenue, profit, cash flow, buybacks, dividends, shares, cash, debt. And when a superinvestor owns it, you see who and how much, from their latest 13F.
As far as I know, no one has put together a list like this in English before.
The three new lists are for members. A paid subscription to Cannibal Stocks opens all of them. Nothing extra. Sign in with the email you use here and the lists open.
Membership works on this side too. I follow three hated industries every week. Coal, offshore drilling, auto dealerships. When something happens, a buyback, an insider buy, a merger, a short report, you hear it here first. Starting now, every week one cannibal gets a full pitch. The share count, the cash, the kill test, the honest score out of ten. Some weeks American. Some weeks one of those hundred Japanese names.
The game
Last year I gave one reader a year of Cannibal Stocks for free. This year the pond is bigger, so the game is bigger.
Restack this post. That is it. You are in. Under 100 restacks, one reader gets a year. 200, two readers. 500, five. The winner will be drawn on December 1. Free readers get a year of everything, the newsletter and all three Radars. If you already pay, a year is added to your subscription. Winners hear from me here on Substack.
Buffett told the world about five companies. I would like the world to know there are a hundred.
On his ninetieth birthday, Warren Buffett borrowed six billion dollars and bought five Japanese companies that were cheap, hated, and eating their own shares. He says he will hold them for fifty years or forever.
Ninety five others were doing the same thing. Cheaper. Faster. Some of them ate half of themselves while the world looked the other way.
Nobody borrowed six billion dollars for those.
You do not need to. You need to turn the page.
Buffett again, at the end of that answer.
“It’s amazing what you can find when you just turn the page. Very few people do turn every page. And the ones who turn every page aren’t going to tell you what they’re finding.”
We turned seventeen thousand of them. And we are telling you.
Cheers, Sandro
Next.
There is a company on this Japan list that the market values at 59 million dollars. It has 53 million in the bank, ten straight years of profit, and last year it bought back fifteen percent of itself in one go. This is the first anomaly that makes absolutely no sense. And the first one that deserves a deep dive down the rabbit hole.
But first, earnings season. Group 1 Automotive reports Q3 this week.
P.S. Don’t forget to restack for a chance to win a free year of Cannibal Stocks. That bush is so undervalued, even Buffett wouldn't know where to start digging. 😂
It is saying there is no subscribed account under tom@northsound.com I am a paid sub and your records will show that.,
Just got it. Thank you for fixing. Love your work