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The unconventional timing of Warren Buffett’s BYD stock sale reinforces his famed investment philosophy – Fortune

Shareholders in BYD, China’s biggest electric-car maker, should be celebrating. 

The company controls 29% of China’s “new electric vehicles” market, which includes both plug-in hybrids and battery-powered cars, far ah…….

Shareholders in BYD, China’s biggest electric-car maker, should be celebrating. 

The company controls 29% of China’s “new electric vehicles” market, which includes both plug-in hybrids and battery-powered cars, far ahead of competitors like Wuling, based in China’s Guangxi province, and Elon Musk’s Tesla. It sold more cars in the first seven months of 2022 than in 2020 and 2021 combined. It’s the second-largest seller of electric vehicle batteries globally, with company executives hopeful that BYD batteries might soon power Tesla cars. The company’s half-year profit is triple what it reported a year ago.

Yet as of Friday market close, BYD stock is down 16.4% for the year and is nearing the lows it hit in March, when BYD shares (along with shares of other EV companies) fell after Russia’s invasion of Ukraine stoked fears of a nickel shortage. The metal is a critical component of batteries.

One man is driving the bearish sentiment: Warren Buffett and his decision to start trimming his sizable stake in the electric-car maker. 

Buffett’s firm, Berkshire Hathaway, according to filings to Hong Kong’s stock exchange, has sold about 3.05 million shares in BYD since Aug. 30, dropping the conglomerate’s stake in the electric-car maker from 20.49% to 18.87%. 

Berkshire’s selloff has encouraged other investors to ditch the stock. BYD’s Hong Kong–listed shares are down about 15.6% since Berkshire Hathaway first disclosed it was slimming down its stake in the electric-car maker. (BYD shares recovered slightly in Friday trading, ending up 2.5% for the day.)

BYD did not respond to Fortune’s request for comment. Berkshire did not respond to a phone call made to its office outside of U.S. business hours.

Buffett’s sale hasn’t pushed analysts to reevaluate their views on BYD. They expect bumper demand for EVs in China for years to come, with government subsidies and other policies encouraging Chinese customers to go electric. “The Chinese auto market is attractive given its size. If investors want to tap the growth potential here, BYD is still a top choice,” Morningstar analyst Vincent Sun told Bloomberg on Aug. 31.

Buffett might still be bullish on BYD’s business and China’s electric car market, too. His firm’s step back from the carmaker fits with his longtime strategy of value investing, meaning his exit may be the result of BYD’s success, rather than any qualms he may have about its fundamentals.

Buffett’s stake in BYD

Berkshire Hathaway bought 225 million shares of BYD for $230 million in 2008. That stake, at BYD’s peak share price equivalent to $42.32 on June 23, was worth about $9.5 billion, an increase 40 times over. 

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Source: https://fortune.com/2022/09/10/warren-buffett-investing-strategy-byd-stock-sale/

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