Korea Small Cap Gem #28: Chokwang Leather - A Cheaper Way to Invest in Berkshire Hathaway

• At the end of 2023, Chokwang Leather owned 190.3 billion won worth of Berkshire Hathaway shares, which represents 56% of Chokwang Leather's market cap.

• Chokwang Leather also has 3.1 million treasury shares (46.6% of outstanding shares). It has the highest levels of treasury shares as a percentage of outstanding shares among Korean stocks.

• Chokwang Leather is likely to be one of the key companies to be targeted to improve its corporate governance as part of the Corporate Value Up program.

Chokwang Leather Company Background

Established in 1936, Chokwang Leather is one of the major leather producers in Korea, mainly serving the automotive industry. The company manufacturers leather fabric producing car seats, shoes, handbags, and other apparel products. Due to the nature of the industry, most of the raw materials are imported, so profitability is highly influenced by international raw material price trends, and raw material prices have a significant impact on its profits.

Chokwang Leather's CEO is currently running a third-generation business as the company has been in business for more than 90 years. CEO Lee took over the family business and has been leading the management since 2019. Chokwang Leather has a long history with working with Hyundai Motor (005380 KS) and Kia Corp (000270 KS) for their leather interior products in the past several decades.

Chokwang Leather automotive leather products (Source: Company data)

Chokwang Leather automotive leather products (Source: Company data)

Chokwang Leather's Major Investments

Chokwang Leather first invested in Berkshire Hathaway and Apple in 2013. Since then, the value of these stocks have risen significantly. At the end of 2023, Chokwang Leather owned 190.3 billion won worth of Berkshire Hathaway shares, which represents 56% of Chokwang Leather's market cap. Chokwang Leather's stakes in Berkshire Hathaway and Apple represents 79% of its market cap.