Warren Buffett’s Berkshire Hathaway cuts stake in Chinese EV maker BYD for the 10th time, sells 2.48 million shares for US$69 million

The share sale on March 31 has reduced Berkshire’s holding in Shenzhen-based BYD to 10.9 per cent from 19.92 per cent in August last year
BYD’s shares have slumped 33 per cent from a record HK$331.40 on June 28 last year, after having risen sixfold over the previous two years

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 1:09pm, 12 Apr, 2023

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Berkshire Hathaway, the investment firm controlled by US billionaire Warren Buffett, continued to trim its stake in BYD, selling 2.48 million shares in the Chinese electric-vehicle (EV) maker last month, at least the 10th reduction since August.

The shares were sold for HK$539.8 million (US$68.8 million) on March 31 at an average price of HK$217.67 per share, according to stock exchange data. Following the divestment, Berkshire’s interest in BYD has dropped to 10.9 per cent from 11.13 per cent, and compared with 19.92 per cent when the Omaha, Nebraska-based investment firm began trimming its exposure last year.

Berkshire has disposed of a total of 105 million shares in BYD since August 24, based on public disclosure. The firm bought 225 million shares in BYD at HK$8 a piece during the 2008 global financial crisis, earning an about 30-fold return over a 14- year holding period.

BYD’s shares dropped 2.3 per cent to HK$222.60 on Wednesday in Hong Kong and its Shenzhen-listed shares fell 2.6 per cent to 243.40 yuan. The decline in its Hong Kong-traded stock has widened to 3.1 per cent this month, extending the overall slump to 33 per cent from the record close of HK$331.40 on June 28 last year. The stock surged sixfold over the preceding two years.

Warren Buffett’s Berkshire Hathaway has once again reduced its stake in BYD. Photo: Reuters

“The main issue for BYD is that the stock has risen too much and has overshot [industry and corporate] fundamentals,” said Wang Chen, a partner at Xufunds Investment Management in Shanghai. “That’s why some investors, including Buffett, are selling it.”

The cutback coincided with a recent wave of price cuts by players from BYD to Tesla and SAIC Motor to reduce inventories. China’s auto sales slumped 6.7 per cent in the first quarter amid a slow economic recovery from the pandemic. ING said in a February report that EVs would be a smaller growth driver for car sales this year as the government rolls back purchase subsidies.

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Analysts tracked by Bloomberg have a consensus 12-month price target of HK$341.97 for BYD shares, implying a 54 per cent upside from the current level. The most bullish call is from Citigroup, which set a target of HK$602 on April 2.

Shenzhen-based BYD, which was founded by billionaire Wang Chuanfu, overtook Tesla as the world’s biggest EV maker by sales last year. Net income surged 12-fold from a year earlier to 7.3 billion yuan (US$1.06 billion) in the fourth quarter, according to its latest result.

Buffett, 92, is in Japan this week to promote Berkshire’s offering of yen-denominated bonds. The billionaire investor said in an interview with Nikkei that he was seeking to boost his investments in Japanese shares.