Was this simply a small tantalising move by Warren Buffett to mark his 92nd birthday this week, or the step one in a significant realignment of a multi-billion dollar holding in one of his most closely watched investments: BYD, the Chinese battery and EV maker?
Buffett turned 92 on August 30 and a day later, his company, Berkshire Hathaway surprised with the first ever sale of its now very profitable stake in BYD.
Berkshire first bought into BYD back in 2008 and hasn’t sold a share until Wednesday, That’s in contrast to other big holdings – even Apple, where he sold shares in 2020 and 2021 and then suffered a healthy dose of seller’s remorse.
The news saw BYD shares lose nearly 8.5% on Wednesday and Thursday. Shares in other renewable linked stocks also weakened, such as lithium groups Ganfeng and Sungrow, which lost more than 5% and 12% respectively.
The sale wasn’t huge – according to a regulatory Berkshire reduced its stake in BYD’s Hong Kong-listed shares to 19.92% from 20.04% on August 24. Berkshire sold 1.33 million shares of BYD for about $US47 million and now owns 218.7 million shares.
The reason or reasons for the sale were not explained in the Hong Kong Stock Exchange filing.
Berkshire paid $US232 million in 2008 for its BYD shares, has been by far the largest shareholder in the EV giant. The value of these shares surged to nearly $US7.7 billion at the end of last year.
Buffett doesn’t need $US47 million, not when Berkshire had $US105 billion in cash on hand at June 30 and will be getting billions in dividends from some of its huge holdings in Apple, Amex, Bank of America and Coca Cola.
BYD is now China’s biggest EV/NEV maker. Its revenue jumped nearly 66% in the first six months thanks to rapid EV sales growth, and its net income more than tripled to $US520 million, according to results out at the start of the week.
The China Passenger Car Association raised its estimate on EV sales to a record 6 million units this year, after NEV deliveries more than doubled in July to around 486,000 units.
US analysts think this could be a warning sign that Buffett could sell more or even quit BYD simply because owning shares in high profile Chinese companies is proving to be increasingly difficult – especially in the tech area, with the government of President Xi Jinping determined to bring these groups under control, as it has done with the likes of Alibaba, Tencent and other tech success stories.
There is a certain incongruity here in that Buffett holds a big stake in a successful renewables business in BYD, while plunging billions of dollars into old fashioned carbon companies like Chevron and Occidental Petroleum.
Berkshire, though, does control America’s biggest renewables utility in Berkshire Hathaway Energy which has huge wind farms, solar farms and other energy assets across the US Midwest and West as well as in the north of the England.
China is becoming an increasingly hostile place for foreign investors, especially those from America and Australia.
The easiest thing to do for a foreign investor is the ‘Wall Street Walk’ – sell and skedaddle.
But if Buffett starts selling BYD it will be an enormous message to investment markets that the world’s most famous investor has lost confidence in China and that will be an enormous red flag, and I don’t mean the type that President Xi drapes himself and his authoritarian government in every day.
Whatever the reason, it’s another market move from the world’s most watched investor in the busiest year he has had for a decade, and we are not even three quarters through it.
