BYD shares dropped after news that Warren Buffett’s Berkshire Hathaway sold its entire stake

• BYD shares fell 3% on Monday following a report that Berkshire Hathaway had sold its entire stake.

• Warren Buffett’s company invested in the Chinese EV maker in 2008 and began paring its bet in 2022.

• Berkshire likely made around $7 billion or 30 times its money, a Business Insider analysis found.

BYD shares fell 3% in Hong Kong on Monday after a report that Warren Buffett’s Berkshire Hathaway had sold the last of its stake in the Chinese EV maker.

The famed investor’s company likely made around $7 billion, or 30 times its money, from the 16-year investment, an analysis by Business Insider found.

Buffett’s conglomerate purchased the stake through its Berkshire Hathaway Energy subsidiary, which revealed in its first-quarter report this year that it had exited the position.

Berkshire confirmed the exit to CNBC, which first reported the disclosure over the weekend. The company didn’t immediately respond to a request for comment from Business Insider.

Berkshire paid $232 million, or just over $1 a share, for 225 million shares of BYD in late 2008. It bought around 25% of the automaker’s Hong Kong-listed shares, or 9.9% of the entire company.

BYD stock soared about 50-fold from there to trade around the Hong Kong dollar equivalent of $50 on March 31, the last day of Berkshire’s final quarter as a shareholder. Adjusted for a three-for-one stock split in July, BYD shares have fallen 16% since then.

Berkshire’s BYD position was worth $9 billion at its peak in June 2022. Buffett and his team foreshadowed their exit by listing their entire stake on the Hong Kong Stock Exchange’s clearing system in July 2022. They hadn’t touched the position in nearly 14 years, reflecting Buffett’s commitment to long-term, buy-and-hold investing.

However, Berkshire began cutting the holding in August 2022 and pared it by 76% by July 2024, at which point its ownership fell below 5% and it no longer had to disclose further sales.

Berkshire has only disclosed the details of some of its transactions. A Business Insider analysis based on those and BYD’s average stock price during the selling period found that Berkshire likely made around $7 billion, or 30 times its original investment.

Buffett was asked why Berkshire was paring its stake in April 2023. He pointed to the massive surge in BYD stock and the prospect of earning a higher return elsewhere.

Charlie Munger, Buffett’s longtime business partner who died in November 2023 at the age of 99, said earlier that year that BYD was his greatest contribution to Berkshire.

“I have never helped do anything at Berkshire that was as good as BYD,” he said. “BYD is so much ahead of Tesla in China it’s almost ridiculous,” he added, underscoring BYD’s rivalry with Elon Musk’s EV maker.

BYD ranks among Berkshire’s best and most unusual stock picks to date. Buffett and Munger bought in when the company was valued below $3 billion. It’s now worth over $130 billion.

Investing in a Chinese technology startup was a departure for the pair, known for their love of established US companies in stable industries such as insurance.

Munger’s admiration for BYD founder and CEO Wang Chuanfu was a big reason he urged Buffett to invest. When Berkshire first invested, Wang had already built BYD into a global manufacturer of rechargeable lithium batteries and cellphone components, which Munger called “a couple of miracles,” and was making inroads into the fiercely competitive, capital-intensive auto industry.

“This guy is a combination of Thomas Edison and Jack Welch — something like Edison in solving technical problems, and something like Welch in getting done what he needs to do,” Munger said of BYD’s CEO in 2009. “I have never seen anything like it.”

BYD’s share price fall since July comes as the company’s explosive growth shows signs of slowing.

Sales in July and August were flat compared to last year, and profits have tumbled amid a government crackdown on discounting in China’s furiously competitive EV sector.

Lei Xing, an independent analyst who covers China’s auto market, told Business Insider that BYD is out of the “high-growth” phase it enjoyed between 2022 to 2024.

Xing said that he thought BYD is unlikely to hit its annual target of 5.5 million vehicle sales. He added that the company faces fierce competition from rivals like Geely and Leapmotor, which have rolled out a wave of new models at highly affordable prices.

Read the original article on Business Insider