Warren Buffett keeps selling BYD. Why some analysts say it’s a buy
Warren Buffett’s Berkshire Hathaway has more than halved its stake in Chinese electric vehicle stock BYD through successive sales over the past 18 months, documents show. The latest share offering was dated Oct. 25, just days before BYD reported record quarterly earnings that prompted some analysts to raise their price targets. Paul Gong, head of China’s automotive business at UBS Global Research, said in a report on October 30, “The automotive business achieved a net profit of 9.4 billion yuan ($1.28 billion) this quarter, which means a net profit of 11,400 yuan per vehicle. “This marks a record high since the company only focused on (new energy vehicle) sales in early 2022, likely supported by economies of scale, accelerating export sales and falling lithium prices,” Gong said. “BYD remains our The most popular electric vehicle brand in the report,” he added. UBS raised its price target to HK$360 (US$46) per share. BYD’s stock price rose nearly 50% from Friday’s closing price. In its latest sell-off of BYD, Berkshire sold its shares at an average price of HK$245.86, according to filings with the Hong Kong stock exchange. Berkshire Hathaway currently holds less than 8% of BYD’s shares. It’s unclear why Buffett withdrew his investment. The issue was not raised at the shareholder meeting in May. In a live interview with CNBC in April, Buffett said only that BYD is an “extraordinary company” run by “extraordinary people” but “I think we will find something with this money that makes me feel better.” Wang Chuanfu is A chemist, he founded BYD as early as 1995. The company has become an auto industry giant over decades as China and other countries push to electrify vehicles. BYD also makes hybrid vehicles. But in the third quarter, it produced thousands more purely battery-powered passenger cars than Tesla did in the same period, according to CNBC calculations of public data. Tesla’s latest quarterly results also disappointed investors. Shares have since fallen about 10%. Bernstein analysts said in a report on November 1 that BYD, China’s number one brand, is the first brand that Chinese consumers consider when buying electric vehicles. They cited their proprietary annual survey of more than 1,500 Chinese consumers in August and September. Bernstein’s analysis found that first-time car buyers and existing car owners of traditional Chinese, Korean and American brands are more willing to buy BYD cars next. The company gave BYD an outperform rating and a target price of HK$359. Unlike Tesla and many of its rivals, BYD sells electric vehicles across a wide price range and is generally considered a value-for-money brand in China. BYD also exports cars overseas, starting with markets such as Southeast Asia and Europe. Jefferies expects BYD’s export sales next year to double this year’s forecast of 200,000 vehicles. Analysts noted that the automaker’s exports accounted for 9% of total sales in the third quarter, up from 6% in the first half. Jefferies raised BYD’s target share price to HK$331 on October 31 and reiterated its buy rating. Buffett’s longtime business partner Charlie Munger did not elaborate on why Berkshire sold a large amount of BYD stock in a rare podcast interview released on Oct. 29. But Munger echoed Buffett’s assessment of BYD’s leadership. “This guy at BYD is better at actual manufacturing than Elon,” Munger told the podcast Acquired, according to a transcript. Munger remained optimistic when asked about investments in China. “The prospects for the Chinese economy over the next 20 years are better than almost any other large economy,” he said. “The leading companies in China are actually stronger, better and much cheaper than the leading companies anywhere else,” Munger said on the podcast. —CNBC’s Michael Bloom and Alex Crippen contributed to this report.
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