BYD bids Warren Buffett's Berkshire an unfazed farewell: Selling is 'normal'

Berkshire Hathaway has completed its full divestment from Chinese EV manufacturer BYD, realizing a substantial profit, a move BYD executives acknowledged as a normal investment cycle. This exit, however, coincided with a more than 6% drop in BYD's Hong Kong shares this week, amid broader concerns about the company's cooling growth, including a reduced 2025 sales target and its first quarterly profit decline in over three years. Concurrently, Berkshire is strategically increasing its holdings in Japanese trading houses, having now surpassed 10% stakes in Mitsui and Mitsubishi, indicating a reallocation of capital towards Japanese equities.

Analysis

Berkshire Hathaway has completed its full divestment from Chinese EV manufacturer BYD, concluding a highly profitable 17-year investment that reportedly generated a 20-fold return on capital. While BYD's management has publicly framed the exit as a normal investment cycle, the market has interpreted it as a bearish signal, contributing to a more than 6% weekly decline in BYD's Hong Kong-listed shares and extending the stock's year-to-date loss to over 28%. This negative sentiment is underpinned by deteriorating company fundamentals, including a 16% cut to its 2025 sales forecast, price reductions, and the first reported quarterly profit decline in over three years. Concurrently, Berkshire is strategically reallocating capital, increasing its positions in Japanese trading houses. The firm's stakes in Mitsui and Mitsubishi have now surpassed 10% and risen to 10.2% respectively, signaling a deliberate rotation from a cooling Chinese growth asset towards what is perceived as value in the Japanese market.

Key Decisions for Investors

• Given Berkshire's complete exit timed with BYD's lowered sales guidance and first profit decline in three years, investors should critically reassess their exposure to BYD, as these events signal significant fundamental and sentiment-driven headwinds.
• Berkshire Hathaway's accumulation of stakes in Japanese trading houses, such as Mitsui and Mitsubishi, to over 10% serves as a strong institutional endorsement, warranting a closer look at these firms as potential value opportunities.
• The clear capital rotation from a premier Chinese growth stock to Japanese value equities should be viewed as a significant strategic pivot, prompting consideration of adjusting portfolio allocations to reflect this potential shift in long-term geographic preference.