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News Topical, Digital Desk : Berkshire Hathaway has sold its entire stake in Chinese electric vehicle company BYD. Significantly, this sale of BYD has generated significant profits for Berkshire Hathaway. However, BYD shares fell by 3% on Monday. Berkshire Hathaway had purchased 225 million shares of BYD in 2008 for $230 million.
The company began reducing its stake in August 2022, after its value increased 41% to $9 billion in the second quarter. By June of last year, Berkshire Hathaway had sold 76% of its stake. Subsequently, its stake in BYD fell below 5%.
How did it become known that the company had sold its entire stake?
According to Hong Kong Exchange rules, sales are not required to be disclosed if the stake is less than 5%. At that time, Berkshire Hathaway was believed to have 54 million shares remaining. However, Berkshire Hathaway Energy's (BHE) quarterly financial results showed the investment's value as zero as of March 31. BHE held all of these shares. However, a Berkshire Hathaway spokesperson confirmed that the entire BYD stake had been sold. Berkshire Hathaway invested in BYD 17 years ago on the advice of Charlie Munger
At the 2009 annual meeting, Manger told shareholders that the investment might seem "crazy," but BYD and its CEO, Wang Chuanfu, were "a miracle." The investment was spectacular. During Berkshire Hathaway's ownership, BYD shares grew by approximately 3,890%. Why did Berkshire Hathaway sell so many shares? Warren Buffett did not specify the reason for the sale. However, in a 2023 interview with CNBC, he said that BYD was an "extraordinary company" run by an "extraordinary person." But "we'll find things for the money that I feel better about." At the same time, Berkshire Hathaway also sold its approximately $4 billion stake in Taiwan Semiconductor, which the company had acquired just a few months earlier. Buffett cited the geopolitical risk posed by Beijing's claim on Taiwan, saying, "This world is dangerous." Warren Buffett hasn't publicly expressed his liberal political views for the past few years. In 2022, he told shareholders that some people are "constantly angry," and this impacts their companies, employees, and shareholders. However, Buffett and President Donald Trump partially agree on one thing: American companies shouldn't pursue very short-term goals. Last week, Trump wrote on TruthSocial that the SEC (Securities and Exchange Commission) should allow companies to report earnings every six months instead of every three. He said, "This would save money and allow management to focus on running their companies properly." CNBC, quoting the SEC, wrote that it is prioritizing this proposal to reduce unnecessary regulatory burden on companies. Buffett has advised companies to stop providing quarterly earnings estimates. In a 2018 Wall Street Journal article co-written with Jamie Dimon of JPMorgan Chase, he argued that quarterly earnings estimates often do little to improve short-term profits, but instead harm long-term strategy, growth, and sustainability.
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