Buffett's Berkshire totally exits its profitable stake in Chinese EV maker bought because of Munger

Berkshire Hathaway has fully exited its highly profitable, 17-year equity investment in Chinese EV maker BYD, realizing an approximate 3890% return on its initial $230 million purchase, with the stake valued at zero as of March 31, 2024. Warren Buffett indicated the move was to find better capital deployment opportunities, echoing his earlier geopolitical risk-driven sale of Taiwan Semiconductor. Separately, Buffett aligns with former President Trump on reducing corporate focus on short-term goals, specifically advocating against quarterly earnings guidance while supporting regular retrospective financial reporting.

Analysis

Berkshire Hathaway has completed a full divestment from Chinese EV manufacturer BYD, concluding a highly successful 17-year investment. The exit finalizes a selling process that began in August 2022, realizing an approximate 3890% gain on the original $230 million purchase made in 2008. The confirmation of the sale comes from a Berkshire Hathaway Energy subsidiary filing, which listed the investment's value at zero as of March 31. While Warren Buffett praised BYD as an "extraordinary company," his stated rationale for selling was to "find things to do with the money that I'll feel better about." This move is contextualized by Berkshire's recent and rapid sale of its Taiwan Semiconductor (TSM) stake, which Buffett explicitly attributed to a re-evaluation of geopolitical risk associated with China. The parallel actions suggest the BYD divestment, despite its profitability, is likely a strategic de-risking from assets with significant China-specific exposure. Separately, the article highlights an alignment between Buffett and former President Trump on reducing corporate short-termism, though with a key distinction: Buffett and JPMorgan's Jamie Dimon advocate against providing quarterly earnings guidance, not eliminating quarterly financial reporting, to foster long-term strategic investment over managing short-term market expectations.

Key Decisions for Investors

• Investors should critically re-evaluate their own exposure to Chinese equities, as Berkshire's complete exit from a highly successful investment like BYD signals a significant concern over long-term geopolitical risk, even for fundamentally strong companies.
• Monitor Berkshire Hathaway's subsequent 13F filings closely to identify where the capital from the BYD sale is being redeployed, as this will provide a strong signal of where Buffett sees more favorable long-term, risk-adjusted returns.
• When assessing management quality, consider whether companies prioritize long-term value creation over meeting short-term earnings guidance, a governance principle endorsed by Buffett that can indicate a more sustainable business strategy.