Warren Buffett Sold Stock in BYD. Why Investors Are Relieved

Warren Buffett has said that his favorite period for holding a stock is forever.


Bill Pugliano/Getty Images

After weeks of speculation, it turns out that Warren Buffett’s firm



Berkshire Hathaway

has sold some of its stock in the Chinese electric vehicle maker



BYD
.

The sale is oddly welcome news to



BYD

investors.

Berkshire (ticker: BRK/B) sold less than 1% of its stake in BYD (1211.Hong Kong), according to a Hong Kong stock exchange filing. Berkshire still holds about 219 million shares, or about 20% of the stock outstanding in the company.

Berkshire’ stake is worth more than $7 billion, while it raised about $60 million in the sale. That is a tiny amount for Berkshire, which has a market capitalization of more than $630 billion and ended the second quarter with roughly $472 billion in cash on its books.

BYD stock was down 0.5% in overseas trading Tuesday, but that was roughly in line with the overall


Hang Seng Index

which is down about 0.4%.

That reaction is a sign BYD investors may have been relieved by the news. The shares plummeted almost 12% on July 12 after a BYD stake the size of Berkshire’s holdings entered the Hong Kong stock exchange’s Central Clearing and Settlement System, leading to fear that Buffett was selling out of the company completely.

Of course, a full-scale dumping of the stake would be a surprise to many investors. Buffett is famous for saying his favorite period for holding a stockis forever. Berkshire has owned BYD stock for more than a decade.

What is more, BYD stock has been a huge winner, returning about 36% a year on average over the past 10 years. The


S&P 500

is up about 14% a year on average over the same span.

BYD stock is still down about 14% from just before the July Berkshire scare, while the Hang Seng Index is off about 6% over the same span. Perhaps investors fear more Berkshire sales are coming.

Berkshire and BYD didn’t immediately respond to requests for comment.

BYD stock is down about 1% so far this year, while car stocks in the


Russell 3000 Index

have lost an average of about 22%. Stock in



Tesla

(TSLA), a BYD rival, has fallen about 19%.

Berkshire stock has slipped about 4% in 2022, outperforming both the



S&P 500

and the


Dow Jones Industrial Average.

Write to Al Root at allen.root@dowjones.com

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