Buffett Further Cuts Stake to Just Under 8% Despite BYD Record Quarterly Profit

BEIJING, November 1 (TMTPost)— Legendary billionaire investor Warren Buffett continued to unwind its long position in BYD despite robust profit growth of the Chinese electric vehicle (EV) heavyweight.

Credit：Visual China

Buffett’s Berkshire Hathaway sold 820,500 Hong Kong-listed BYD shares at an average price of HK$245.86 apiece (US$31.42) on October 25, according to a filing with the Stock Exchange of Hong Kong (HKEX) earlier this week. Following the sale, Berkshire’s stake in the Chinese EV company was down from 8.05% to 7.98%, representing sales of HK$201.73 million (US$25.78 million) worth of shares.

This is Berkshire’s thirteenth offloading in Hong Kong made public since August 2022, suggesting it has cashed out a total of over HK$6.6 billion by sales of approximate 138 million shares. The investment company disclosed on August 24 2022 about sales of 1.33 million shares, the first stake reduction since acquiring 225 million BYD shares for HK$8.00 each in September, 2008. The holding has been trimmed by around 60% since first sale that reduced Berkshire’s holding in BYD to 19.97%. Prior to that sale, Berkshire held a 20.49% stake in BYD.

Berkshire’s sales came as BYD posted another quarterly record in the past quarter. The Shenzhen-based company generated RMB162.15 billion in the quarter ended September 30, rising 38.49% from a year ago, and increased net income 82.16% year-over-year (YoY) to RMB10.41 billion that quarter. That is BYD’s first time to rake more than RMB10 billion in a quarter. The net income in the third quarter surged 42.4% from the previous record set in the last quarter of 2022.

More impressively, BYD’s gross profit margin in the third quarter edged up 1.07 percentage points YoY to 19.79%, widening its gap between Tesla. The U.S. EV giant reported a gross margin of 17.9% that quarter, falling from 25.1% a year earlier, when it had not yet begun the price cuts. This is the second straight quarter that Tesla was overtaken by BYD in terms of margin.

As a long-term investor of BYD, Berkshire’s continuous offloading easily raises questions about the Chinese EV maker’s outlook, though either its management or Buffett and his ally expressed confidence in it.

BYD Executive Vice President Stella Li played down Berkshire’s sales in January, when the US conglomerate disclosed its first stock sales this year. Li said its “very natural” for Buffett to get some returns. The executive didn’t treat the offloading as any indication that the investor’s abandoning BYD. Instead, Buffett “loves” the company and its management since he will always be its biggest supporter, Li said.

Buffett called BYD “extraordinary” in an interview in April, right after his company disclosed to lower its holdings from 11.13% to 10.9%. “We’ll find things to do with the money that I’ll feel better about,” the 92-year-old Chairman, CEO and Chief Investment Officer of Berkshire said.

Calling BYD his best investment in Berkshire, Charlie Munger, Buffett’s long term investment partner, said it is “almost ridiculous” how much it’s beating Tesla at the Daily Journal’s annual meeting in February. Berkshire initial investment is now “worth about $8 billion or maybe [$9 billion]. That’s a pretty good rate of return,” said the 99-year-old Vice Chairman of Berkshire. He admitted BYD now is not a cheap stock any more, but added “on the other hand, it’s a very remarkable company.” In an interview via a podcast published on October 29, Munger hailed BYD as “a miracle” for the company gathered many talents and addressed all the problems about EVs.