's stock price was halved 6 times, Buffett still firmly holds BYD 14, but now it reduces its holdings in BYD for the first time when BYD's performance is rising. What is the "Stock God" thinking?
htmlOn September 2, the Hong Kong Stock Exchange disclosed the share reduction information of Buffett's investment company Berkshire Hathaway. Just yesterday, the "Stock God" sold 1.72 million shares of BYD H shares at an average price of HK$262.72 per share, and the shareholding ratio dropped from 19.02% to 18.87%, and a total of about 396 million yuan was cashed out.In fact, in the past two months, Buffett has reduced his holdings in BYD by 8 million shares. According to BYD's interim results, as of June 30, Berkshire Hathaway's still held 225 million BYD H shares. Now, the company's holdings have dropped to 217 million shares.
Due to the impact of Buffett's continued reduction in holdings, BYD's stock prices in Shanghai and Hong Kong continued to fall. As of the close of September 2, BYD's market value of A shares has evaporated by nearly 80 billion yuan in the past three trading days. As Buffett releases information on reducing his holdings again, BYD's stock price may continue to fall next week.
, coinciding with the largest overseas Chinese stock fund, Allianz Global Investors, reduced its holdings of the largest holding stock CATL by 15.27% on August 31.
An analyst in Shanghai told Observer.com , "BYD and CATL were reduced in holdings, which was a profit-taking, which is normal. In the long run, the growth rate (new energy track) will definitely drop, but it is still in a high prosperity."
Buffett, who pursues value investment, has always emphasized a concept, "I am afraid when others are greedy, and I am greedy when others are terrified", which is also regarded as a criterion by some investors. Similar to the operation of investing in PetroChina, Buffett also chose to escape from , but was he bet right this time?
Why did Buffett choose BYD
choose to hold a heavy position in BYD, but he is unwilling to invest in Tesla . Behind this is Buffett's choice for Wang Chuanfu and Musk.
"We must invest in BYD, Wang Chuanfu is better than Edison." In 2008, Buffett's golden partner Munger told Buffett in a phone call.
Buffett did not adopt Munger's suggestion at first. At that time, the 2008 financial crisis had swept the entire Wall Street , Lehman Brothers went bankrupt, American International Group (AIG) was on the verge of bankruptcy, institutions successively exploded, and the entire market fell into extreme panic.
2017-2022 BYD Hong Kong stock trend
Munger called Buffett for the second time, saying that Wang Chuanfu is a "combination of Edison and Bill Gates", which can not only solve technical problems, but also effectively manage enterprises. Under Munger's insistence, Berkshire Hathaway's wholly-owned investment subsidiary Western Capital bought 225 million BYD Hong Kong stocks at a price of HK$8 per share in 2008, becoming BYD's fourth largest shareholder.
In the second year of Western Capital investment, BYD launched the world's first mass-produced plug-in dual-mode electric vehicle, and its stock price once exceeded HK$80. But in 2010, BYD's stock price halved and returned to the HK$40 range. It was also the worst performer in the Berkshire investment portfolio that year. In the same year, Tesla rose rapidly. Its founder Musk said in an interview with the media that BYD has no technical barriers and believes that BYD is not a competitor of Tesla. Wang Chuanfu was not showing weakness, saying that "you can build a Tesla in minutes."
But at that time, the market had a voice of short-selling BYD, and BYD was labeled as "cheap" and "counterfeit", while Tesla represented "technology" and "high-end".
During the sluggish stock price, Buffett did not choose to sell BYD. Instead, after visiting BYD's headquarters and multiple factories, he said that he was optimistic about BYD's new energy business in the long term. Buffett intends to increase his stake in BYD, but Wang Chuanfu is not willing to continue.
Munger also publicly supports BYD, "Wang Chuanfu is very serious about his own company. He does not publicly offer shares like other companies, but chooses to share the stocks with his employees. This is valuable for entrepreneurs. Compared with family businesses, such a management system looks much better.”
Wang Chuanfu is a typical technical maniac. He often goes in and out of various workshops when wearing work clothes. Some media quoted BYD insiders as saying, “Once when the team was discussing a technical issue, he (Wang Chuanfu) said after hearing this, other factories had applied for (patent). Later, I went back and checked and found that I had indeed applied. ”
On the contrary, Buffett and Musk do not call each other. In Buffett's view, Musk is a creative person, but he will not buy Tesla stocks. Munger's evaluation is more direct, "Musk is one of the boldest geniuses in history, but what worries me is that he is very likely to think that his IQ is 250 when his IQ is only 190, which will obviously bring him a considerable risk. "Munger said at the shareholders' meeting that he would never invest in Tesla.
The most significant difference between Wang Chuanfu and Musk is that the former is a typical oriental entrepreneur, low-key and restrained, and rarely appears in public. The latter is more willing to share various views in public, realize brand marketing through his own influence, and even make some controversial remarks. For example, Musk said that he does not admire Buffett, who is bored at work, "The purpose of reading a large amount of financial reports is nothing more than to figure out which one is Pepsi or Coca-Cola is higher. ”
Musk and Buffett do not appreciate each other, which is essentially the difference in values between the two sides.
Musk likes to put on the cloak of high-tech for himself. While bringing high valuations to Tesla, he also bears huge risks. Don’t forget that the automobile industry is still manufacturing after all, and one day it will return to the average profit margin of the manufacturing industry.
As Longi Green Energy Technology Co., Ltd. President Li Zhenguo said, “Everyone who can create is the norm. ”
On that day, Tesla may face a tragic return of valuation.
And whether Buffett invests in Coca-Cola or BYD, he is essentially investing in the logic of manufacturing. Manufacturing is not a high-profit industry. When capital is flooding in and giving the industry a valuation beyond the manufacturing industry, it often means a bubble.
From this perspective, Buffett has always been a believer in "Made in China" - working hard and staying away from bubbles.
Under the current high valuation, Buffett's reduction in holdings in BYD has become a normal choice. The "Stock God" may not be optimistic about BYD, he just doesn't care about BYD's current valuation.
New energy valuation returns to rationality
Whether it is BYD, Tesla, or CATL, they are all experiencing a period of high prosperity in the new energy track, but does Buffett and institutions escape the top signify that the valuation of the sector will return to rationality?
BYD's net profit in the first half of 2022 reached 3.595 billion yuan, exceeding the net profit for the whole year last year (3.045 billion yuan). BYD stated at the investor meeting that BYD's sales target in 2022 is conservatively expected to be 1.5 million vehicles. If the supply chain improves, it will hit 2 million vehicles.
BYD's interim performance composition
BYD responds to investors that it is not advisable to over-interpret Buffett's share reduction.
stock gods also have times to get lost. In the field of technology, Buffett and Munger repeatedly stated in public that although they are unanimously optimistic about Google and Amazon , they missed the best investment opportunity because they do not understand the business model.
Because they do not understand technology companies, Buffett has always been reluctant to invest in such companies. The IBM he bet on also chose to clear his position because his returns were not as expected after holding for six years. In the field of aviation, Buffett has always been reluctant to invest in such companies. In 2020, Fighter bought the bottom of at at a price of $45 per share. Delta Air Lines, but Delta Air Lines' stock price fell all the way, and finally had to cut its losses when the stock price was cut in half. In the retail industry, Buffett also chose to clear his position at the wrong time. In 1998, Buffett built a position in Walmart and increased his position in 2007, becoming one of the five major stocks. Affected by the financial report, since 2010, Buffett continued to reduce his holdings and sold all Walmart stocks in 2018. Just after Buffett cut off Walmart's stock, Walmart's stock price ushered in a wave of rise, with the stock price rising from $70 to $100.Buffett said in annoyance, "It's too difficult to figure out the information in the retail industry. I lost too much money on it."
Similarly, Buffett's not optimistic about Tesla does not mean that Tesla is not a good company. "Stock God" just doesn't make money outside of his system.
Domestic securities companies and Buffett also hold different opinions on BYD's market prospects. Huachuang Securities gave a strong recommendation rating, Great Wall Securities gave an increase rating, Dongwu Securities , Anxin Securities , Guohai Securities and other securities companies maintain buy rating .
Guosen Securities research report pointed out that according to data disclosed by the China Passenger Car Association, BYD's new energy passenger car market share in the first half of the year was about 28%, and plug-in hybrid passenger car market share was about 63%, and sales performance continued to lead the industry. At the same time, benefiting from the rapid growth in sales of automobile products and the cost sharing of scale effects, the company's gross profit margin and net profit margin have improved significantly, and investment in R&D and marketing has continued to strengthen.
But from the perspective of valuation, in the current new energy vehicle track, lithium battery factories correspond to the price-earnings ratio in 2023 at around 30, upstream parts companies are around 20, and upstream lithium salt processing companies are around 15 times. As of press time, BYD's rolling price-to-earnings ratio is 150, which has a certain premium.
Some people believe that BYD's batteries rely on lithium iron phosphate , and the technical barriers of lithium iron phosphate are relatively limited. If the technological route of batteries is innovated, the medium- and long-term competitiveness of lithium iron phosphate will decline, then the core competitiveness of BYD companies will also be affected.
What the market is worried about is whether the penetration rate of new energy reaches 30%, will its penetration rate slow down and can relevant leading stocks maintain high growth?
on the one hand reduces its holdings in new energy stocks, and on the other hand, it has a heavy holding of oil stocks. Recently, Buffett bought 9.9 million Occupy Oil's shares for US$582 million. As of August, he held a total of 180 million Occupy Oil's common stock, accounting for 20.2%. At the same time, a document from the US government also disclosed Buffett's ambitions, allowing Buffett to obtain 50% of Occidental's stock in the open market. And two years ago, Buffett just cleared his position in Occupy.
Regarding Buffett's choice, Bank of America issued a warning not to blindly follow the trend because of Buffett's massive purchase of Occidental Oil. Buffett's actions may repeat the failure of betting on ConocoPhillips in 2008.
But then again, Buffett was able to re-bet the oil industry after many years, and one day in the future, he may not be able to re-buy BYD.
stock price fluctuates, but BYD's manufacturing nature will not change.
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