Focus Stock of the Week: Mitsui & Co.

Mitsui & Co. (OTC: MITSY), is a Japanese general trading company with attractive long-term growth potential. Mitsui's unique business model leverages Japan's public-private financial ecosystem for compounding wealth with minimized risk exposure.

Business Model and Financial Strategy

Mitsui & Co. is a large, global keiretsu—a type of Japanese conglomerate characterized by interlocking business relationships and shareholdings—that operates across numerous sectors including mineral resources, energy, infrastructure, machinery, chemicals, food, and healthcare. The core of its strategy is a system that uses Japanese public institutions which effectively social risk while giving the company very cheap financing.

This mechanism provides:

1. Near-Unlimited, Low-Cost Funding: Mitsui, which has $106.7 billion in assets, can borrow at exceptionally low rates (as low as 0.4%), a massive advantage over inflation.

2. Risk Mitigation: State-backed institutions, such as the Japan Bank for International Cooperation (JBIC), which holds $150 billion in assets, offer low-interest loans (often below 1%) and guarantees for overseas projects. JBIC can cover up to 70% of political and commercial risks, meaning Japanese taxpayers bear the potential losses while Mitsui captures the upside.

This efficient model allows Mitsui to deploy capital into high-return assets with minimal personal risk, resulting in a Return on Invested Capital (ROIC) of 15%, which is significantly above global averages.

Valuation and Investment Thesis

• Undervaluation: Mitsui officially trades at a Price-to-Book (P/B) ratio of approximately 1.0x (meaning the market price equals its reported book value). However, a sum-of-the-parts analysis suggests an intrinsic value 1.4x higher than its market price, indicating 40 cents of upside per dollar invested.

• Wealth Compounding: The company's current $71 billion market capitalization lags the estimated $100.7 billion sum-of-the-parts valuation. Unlike a static investment, Mitsui is described as a perpetual wealth machine, compounding value at a 12% to 15% ROIC through its capital-light investment stakes.

• Macro-Thematic Appeal: The company is seen as a strategic hedge against the global flight from fiat currencies, allowing investors to acquire undervalued claims on productive hard assets.

Mitsui & Co. (OTC: MITSY) is a great buy and hold investment. Once you own it never sell it.

To your success,

Thomas Moore

Disclosure: The author has no plans on being long MITSY at this time. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

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