As BYD shares soar, Warren Buffett has paused selling shares

Since October, his Berkshire Hathaway Inc. has unloaded about 1% of BYD shares, reducing its total stake in the automaker to 6.9%, according to a Hong Kong stock exchange filing on June 14. That pales in comparison to the 10-month period between August 2022 and June 2023, when the Nebraska-based firm was cutting its holding by one percentage point nearly every month. 

The legendary investor’s pattern aligns with the topsy-turvy developments in China’s EV sector, characterized by trade tensions and intense price competition but also increasing global market penetration. Considered an industry bellwether, BYD’s stock has largely recovered from a steep drop that began late last year.

“Berkshire was probably expecting a higher valuation, so paused after the last selldown,” said Bloomberg Intelligence analyst Joanna Chen. 

As of mid-2022, Berkshire had owned about a fifth of BYD’s Hong Kong-listed shares. Its fast-paced selling in the ensuing months triggered speculation that the long-time backer was poised to take profit and exit. In another of his Chinese investments, Buffett fully unwound ownership in PetroChina Co. in 2007 by selling in stages over three months. 

BYD’s shares had dropped as much as 36% once Berkshire first began selling in August 2022. But the stock is up nearly 9% this year and is hovering around its highest level since November. 

Despite missing 2023 net income estimates, BYD told investors in March that it’s targeting a 20% rise in sales this year. That momentum could be stymied by the European Union’s planned hike in tariffs for Chinese EVs that could total as much as 48%.  

But BYD’s cost advantage is “almost unreplicable,” Chen said. “If they can bypass tariffs and are willing to compete on price outside of China, then sales and market share are likely to take another leap.”