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Warren Buffett just dumped $40 million of this stock

Warren Buffett just dumped $40 million of this stock
Elmaz Sabovic

Berkshire Hathaway (NYSE: BRK.A), led by Warren Buffett, was an early investor in BYD (OTC: BUDDY) and has continued to reduce its stake in China’s largest electric vehicle maker. 

Buffett’s conglomerate recently sold an additional 1.3 million Hong Kong-listed shares of BYD for $39.8 million, lowering its holding from 7% to 6.9%, according to a June 17 filing with the Hong Kong Stock Exchange.

Berkshire initially purchased about 225 million shares of the Shenzhen-based BYD in 2008 for around $230 million. This investment proved highly profitable as the electric vehicle market experienced explosive growth in China and beyond. 

After BYD’s stock surged nearly 600% to a record high in April 2022 from its 2008 levels, Berkshire began selling off half of its holdings in 2022 and 2023.

BYD stock all-time price chart. Source: Google Finance
BYD stock all-time price chart. Source: Google Finance

Hong Kong regulations require a filing when a stake crosses a whole number. Therefore, another filing will be made if Berkshire’s stake drops below 6%.

BYD is the world’s largest EV producer

BYD is the largest EV producer for the second straight year, according to data acquired by Finbold, which indicates that in the first half of 2023, BYD sold 1,191,405 electric vehicles, representing an average of 198,567 units per month. BYD’s unit sales surpassed Tesla’s (NASDAQ: TSLA) 888,879 by 302,526 vehicles.

One key aspect of BYD’s appeal is its commitment to offering value for money, aligning with local demand for affordable, domestically-made products in a slowing Chinese economy. BYD’s vehicle models are priced lower than those of foreign competitors.

Why is Buffett selling his BYD stock holding?

Berkshire Hathaway has been selling its BYD stock, likely due to rising geopolitical tensions between the U.S. and China. Buffett may have decided to reduce exposure to China, similar to selling Taiwan Semiconductor (NYSE: TSM) shares. 

Buffett cited the rapid rise in BYD’s stock and the potential for better investments as reasons for the sale. “The Oracle of Omaha” likely wanted to realize some of their 30-fold gain, especially as BYD faces risks in a competitive and capital-intensive industry.

Additionally, BYD was never a perfect fit for Buffett’s portfolio, as he typically invests in U.S.-based companies in familiar industries.

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