As of this past Wednesday, Warren Buffett’s Berkshire Hathaway has sold all of its profitable investment in Chinese electric vehicle maker BYD. Berkshire’s SFY TCO 0.65 Buffett has long emphasized investing for the long term. In doing so, he takes to task the shortsighted, quarterly-driven capital markets. Whatever prompted the sale, those reasons are still largely undisclosed. This aggressive step marks a huge turnaround from a company that had previously seen BYD as an irreplaceable opportunity.
Berkshire Hathaway first invested in 225 million shares of BYD in 2008 for about $230 million. Through the years, Buffett has continually touted the auto company and its CEO, Wang Chuanfu. At one 2009 annual meeting, he called them a “damn miracle” to boot. Most recently, in 2023, he repeated those words of praise, calling BYD an “extraordinary company,” and calling it to be guided by an “extraordinary person.” As of June of 2022, Berkshire Hathaway had sold almost 76% of its stake. That action brought their combined stake down to slightly below 5% of BYD’s outstanding shares.
Berkshire Hathaway started its gradual divestment of BYD shares starting in August 2022. A spokesperson subsequently confirmed that the full position has been sold. This closes the door on an era of Buffett’s active participation in the electric vehicle space. The timing of this exit is a hopeful symptom of Buffett’s greater worries over the way that quarterly earnings guidance distorts corporate priorities.
Warren Buffett has been a vocal opponent of the practice of issuing quarterly earnings-per-share guidance for years. He contends that this trend produces a toxic obsession with short-term profits. This fixation only serves to erode future growth and sustainability in the long run. He doesn’t shy away from saying these things. He claims this type of guidance generally encourages firms to pursue short-term financial returns at the expense of a longer-term strategic vision.
With the support of Buffett through a “special” collaborative effort with JPMorgan Chase CEO Jamie Dimon, he has tipped his hand. They’re not opposed to companies reporting earnings every three months, but they argue that financial markets have become dangerously fixated on short-term performance. This fixation, they contend, comes at a real cost to employees and shareholders both. Buffett has been known to comment that some people get “sustainably angry.” They frequently redirect their anger against the businesses they rely on, which can jeopardize their long-term health.
Buffett has not publicly elaborated on his rationale for his full exit from BYD. He’s excited about where he can shift that money instead. He stated, “I think that we’ll find things to do with the money that I’ll feel better about.” He is clearly committed to continuing to seek investments that align with his long-term vision with or without new investments. He’s not letting market pressures push him around.
Selling off BYD shares is a major turn of events, reflecting the increasing resolve of investors. All are growing increasingly aware of the dangers of increasing market volatility and the impacts of global economic uncertainties. As companies continue to navigate challenges related to supply chains and environmental regulations, Buffett’s choices may reflect a strategic pivot towards sectors with more stable prospects.