Japanese trading houses, including Mitsubishi and Marubeni, rallied on Tuesday after Berkshire Hathaway¡¯s plans to increase holdings were seen as a stamp of approval for the undervalued sector.

Mitsubishi rose as much as 8.6%, while Marubeni added almost 8% in morning trade in Tokyo. Mitsui, Itochu and Sumitomo also had strong gains. The broader Topix index slid 0.4%.

Warren Buffett¡¯s conglomerate said in 2020 that it had invested in Japan¡¯s five largest trading houses. Berkshire originally agreed to keep its holdings at the companies below 10%, but the trading houses have agreed to relax the ceiling ¡°moderately,¡± Buffett said in his annual investor letter dated Saturday.

¡°Trading houses are trading at well below their peak now, so Buffett probably sees this as a chance to buy more,¡± said Norikazu Shimizu, an analyst at IwaiCosmo Securities. ¡°With Trump¡¯s presidency and lots of changes to tariff policies, the market is uncertain, but trading houses are involved in a wide range of business, so Buffett likely sees them as a safe bet.¡±

The trading houses are involved in a wide range of businesses ¡ª from overseas oil and gas production to salmon farming and TV shopping ¡ª and have outpaced the Nikkei 225 since Buffett¡¯s investment was announced. While the companies have benefited from a surge in commodity prices from 2022, their diversity in other segments helps them weather price volatility.

Buffett¡¯s interest ¡°is proof that the trading company sector, including our company, is highly valued,¡± Marubeni said in an emailed statement. Itochu said it¡¯s progressing talks with Berkshire on potential collaborations, such as Duracell or Fruit of the Loom, according to a statement from the Japanese company. Berkshire¡¯s sprawling businesses include the battery brand and the retailer.

Buffett praised Japan¡¯s trading firms for increasing dividends when appropriate, conducting share buybacks when it is ¡°sensible to do so,¡± and for being less aggressive in their executive pay than U.S. counterparts.

¡°Over time, you will likely see Berkshire¡¯s ownership of all five increase somewhat,¡± the veteran investor said. ¡°Our holdings of the five are for the very long term, and we are committed to supporting their boards of directors.¡±

Mitsubishi is in discussion with Berkshire on cooperating on individual projects, including through joint investments, the Tokyo-based trading house said on Sunday. Mitsui says it plans to have a dialogue with Berkshire going forward.

¡°This is a tailwind for trading company stocks as a whole, and it seems likely to lead to a certain sense of security for investors,¡± said Hideyuki Ishiguro, chief strategist at Nomura Asset Management.