No. of Recommendations: 16
This is from CNBC's Buffett Watch email last night:
Berkshire totally exits its profitable stake in Chinese EV maker
Berkshire Hathaway has completed exited its extremely profitable equity investment in the Chinese electric vehicle maker BYD.
In August of 2022, Berkshire started to reduce the 225 million share position it purchased in 2008 for $230 million.
That followed a 41% jump in the value of the position during that year's second quarter to $9 billion.
By June last year, Berkshire had sold almost 76% of its stake, bringing it just under 5% of BYD's outstanding shares.
By crossing below that level, Berkshire no longer had to disclose subsequent sales under the Hong Kong exchange's rules, so as far as we knew the company owned 54 million shares.
A Buffett Watch reader, however pointed out to me that the Q1 financial filing by Berkshire Hathaway Energy, the subsidiary that held the shares, listed the value of the investment as zero as of March 31.
A Berkshire spokesperson confirmed to me today that the entire BYD position has indeed been sold.
Based on the investment values listed in BHE's reports, the sales continued after the stake fell below 5% last year.
Berkshire made its initial purchase 17 years ago at the urging of Charlie Munger.
At the 2009 annual meeting, he told shareholders that even though it looked like "Warren and I have gone crazy," he saw the company and its CEO, Wang Chuanfu, as a "damn miracle."
It was an incredible call. BYD shares increased by roughly 3890% during the years Berkshire owned them.
Buffett has not explained in detail why Berkshire started selling, but in 2023 he told CNBC's Becky Quick that BYD is an "extraordinary company" being run by an "extraordinary person," but "I think that we'll find things to do with the money that I'll feel better about."
Around the same time, Berkshire sold almost all of the company's Taiwan Semiconductor stake, roughly $4 billion of stock, just months after the shares were purchased as he "reevaluated" the geopolitical risk posed by Beijing's claim that Taiwan is part of China. "It's a dangerous world," he said.
No. of Recommendations: 7
Thanks. What amazing calls by Charlie:
1.BYD compounding to become nearly a 40 bagger, bringing in several billions in gains.
2. Patiently waiting then bottom ticking WFC under $9 in Spring 2009.
So glad Charlie was able to do his homework, get to know mgt and see the future & more importantly, convince WEB that BYD was worthy of $230M investment!
No. of Recommendations: 6
I wish he would have convinced Warren to keep WFC and WMT (and a few others) which have hit new ATH's since they completely sold out of the position.
WFC in particular was an odd sale in that he sold out at such a low price. If I recall at the time he seemed unhappy with the CEO for some reason? It almost seemed like he sold on emotion. What is that saying, "emotions are the enemy of good investing."
No. of Recommendations: 20
WFC in particular was an odd sale in that he sold out at such a low price. If I recall at the time he seemed unhappy with the CEO for some reason? It almost seemed like he sold on emotion. What is that saying, "emotions are the enemy of good investing."
I tend to agree that the sale was abrupt. Selling at ~$25 a huge position that was at the time plainly going to fetch over $40 soon enough seemed precipitous. (not hindsight, I said exactly the same thing at the time!)
But as for emotional selling, in this case I believe the emotion was "I no longer trust management", which is perhaps a reasonable exception to the rule.
Jim
