Author｜ Yuchen
Editor | Limbilly
BYDThis year is a mixed bag.
The good news is that in the first half of this year, BYDNew energy vehicle salesIt reached 641,400 units, surpassing Tesla in one fell swoop and becoming the world‘s top seller.Just in June, BYD’s market value exceeded the 1 trillion yuan mark, not only becoming China’s largest car company by market value, but also surpassing Volkswagen to become the third largest in the world.Car manufacturerbusiness.
But worries also followed, BYD’s share price continued to weaken, especially since the end of August, the Hong Kong Stock Exchange disclosed twice in a row that Warren Buffett reduced his holdings of BYD, which also intensified the volatility of BYD’s share price. Speculation is rampant, and the “stock god” is going to clear BYD?
At the same time, because of Buffett’s reduction action, the discussion about whether the valuation of the new energy industry is overvalued has intensified.
“Stock God” cashed out for the first time in 14 years
On August 30, the Hong Kong Stock Exchange disclosed that Berkshire Hathaway, a subsidiary of Buffett, sold 1.33 million BYD H shares on August 24 at a reduced price of HK$277.1, cashing out nearly 3.69 billion Hong Kong dollars. So far, Buffett still holds 218.719 million shares, the proportion of issued voting shares has dropped to 19.92%.
This confirmed the market’s previous speculation. According to the Hong Kong Stock Exchange document, on July 11, the number of BYD H shares in Citibank’s trading seats reached 388.6 million shares, an increase of 225 million shares, which is exactly equivalent to The number of BYD shares held in 2008.
Only three days after the first reduction, the Hong Kong Stock Exchange disclosed a new reduction. According to the documents of the Hong Kong Stock Exchange, Berkshire Hathaway reduced its holding of 1.716 million H shares of BYD shares on September 1, with an average price of HK$262.72 and a value of HK$450 million. 071.4 billion shares, and the shareholding ratio was lowered to 18.87%.
Source: Official website of the Hong Kong Stock Exchange
In fact, the Hong Kong Stock Exchange stipulates that major shareholders of listed companies who hold more than 5% of the shares only need to declare within 3 trading days when the increase or decrease of their shareholding interests reaches a certain standard. As in BYD’s semi-annual report, Buffett’s shareholding is still 225 million shares. Therefore, during the period between the disclosure of the semi-annual report and the disclosure of the second shareholding reduction, Buffett should still have a shareholding reduction that does not need to be disclosed.
Calculated according to the shareholding ratio, as of September 1, Buffett’s cumulative reduction in holdings reached 17.86 million shares. The total reduction in shares reached nearly 8% of Buffett’s previous holdings of BYD.
A relevant person from BYD’s investor relations department responded urgently on August 31, saying, “Don’t over-interpret this matter, the company’s operations are all normal.”
But the capital market obviously has some doubts about such a reply. In the three trading days after the disclosure of the first reduction, BYD’s A shares and H shares both fell by more than 10%. On September 2, BYD’s American depositary receipts fell by more than 6%. As of September 7, BYD’s H shares have fallen by 15% in the past seven trading days, and A shares have fallen by nearly 10%.Affected by the news of the reduction in holdings, the entirenew energy vehiclesThe ETF had the biggest drop of nearly 7%.
The market has reacted violently. In addition to Buffett’s own influence, another important reason is that Buffett has held BYD for 14 years. In September 2008, Buffett signed an agreement with BYD to subscribe for 225 million H shares of BYD shares at a price of HK$8 per share. Then began a 14-year holding. There was no transaction during this period. Estimated at the latest closing price, Buffett’s investment has appreciated more than 30 times.
During Buffett’s 14 years of holding BYD, BYD’s share price has gone through many roller coasters. After Buffett announced the investment in 2008, BYD’s share price rose sharply, but soon the share price returned to its original shape, with a maximum retracement of more than 80%. The market once believed that Buffett invested in BYD. Bad decision.
But Buffett was unmoved. The statement of the company’s vice chairman, Charlie Munger, may explain why Buffett is bullish on BYD. Munger spoke highly of Wang Chuanfu, the founder of the company, and believed that Wang Chuanfu was a combination of Welch and Edison, who not only understood theory and technology, but also rigorously turned ideas into reality step by step.
Buffett himself has not hesitated to praise BYD. In April 2020, a photo of a stock god wearing a BYD mask circulated online. Buffett said that my goal is to live a long life, and BYD masks help me. It turns out that holding firmly pays off.
Buffett ‘wrong again’?
Buffett’s actions have sparked widespread discussion, and even a “mouth battle.”
Economist Ren Zeping publicly wrote an article “Not investing in new energy now is like not buying a house 20 years ago”, clearly stating: “I don’t know why Buffett is reducing his holdings this time. If he is bearish on the prospects of the new energy industry, Buffett will I was wrong this time. After all, I am 92 years old this year, and I have no energy. It is difficult to quickly learn and iterate on information. It will become more and more conservative rather than aggressive, and the performance will not be as good as before, if the successor cannot be trained well, there is a risk of not being able to guarantee it in the evening.”
In Ren Zeping’s view, new energy is the most promising and explosive industry in the future. Short-term adjustments are normal and long-term potential is huge. On the one hand, new energy vehicles are entering the stage of rapid popularization among the masses, and the market penetration rate still has room for 3-5 times. On the other hand, green electricity,energy storage,Battery,ChargeThere is a huge market space for piles, intelligence, and new materials. He believes that from the perspective of industrial investment, new energy is the best track in the next 3-5 years.
Aside from Ren Zeping’s judgment on the investment prospects of the new energy track, there is also a view that it may be too early to assert that “Buffett is wrong” so quickly.
After all, Buffett has achieved a return on investment of more than 30 times. Although BYD’s stock price has fallen by more than 20% from the highest point, it is still at a historically high position. It is a normal investment decision to try to reduce its holdings by a small amount.
What’s more, the continuous selling behavior can be terminated at any time, and even if “mistakes” can be corrected. In 2020, Berkshire Hathaway once sold a small portion of Apple’s stock, and in the fourth quarter of 2020, Buffett reduced his holdings of Apple’s stock by 3.7%.
At Berkshire Hathaway’s annual meeting in 2021, Buffett admitted that “it might be a mistake to sell some Apple stock, which is very cheap, and its products are indispensable to people and popular in the world. “.
Li Daxiao, chief economist of Yingda Securities, stood in support of Buffett in the live broadcast. Li Daxiao believes that Mr. Buffett told us with almost 80 years of investment experience that his method is feasible.
“I still think it’s good to be a student with humility and learn from people with 80 years of experience. Don’t say Buffett is wrong today, say Buffett is old tomorrow, say I surpassed Buffett the day after tomorrow, and wait for you to surpass it. It’s not too late for Buffett to brag.” Li Daxiao said.
A small private equity investment manager told Value Planet that it is currently impossible to judge whether Buffett’s reduction of BYD’s holdings is to clear his position, and he can only wait for subsequent information disclosure. “But if it can be confirmed that the 225 million stocks under custody are indeed from Berkshire Hathaway, it shows that Buffett has the willingness to sell, which is the same as retail trading orders. As for the reason behind it, it may be BYD’s two years. It’s growing faster, and the stock price is reflecting its intrinsic value and even overdrafting future performance.”
In addition, the small private equity investment manager believes that if only from the perspective of investment style, Buffett believes in the trading law not to lose money, so as long as there is profit, no matter how much, it is right to reduce or liquidate positions. “There are very few institutions that can hold shares like Buffett for more than ten years. The trading style of many quantitative investments is high-frequency trading. Buffett scoffs at this trading style. In the eyes of these institutions, Buffett may also think that Buffett is wrong. Bar.”
A founder of a stock analysis data website believes that from the perspective of Buffett’s investment style in the past, he will not predict the macro or the future stock price trend of a company. “Selling stocks is often to free up funds for better investors. Investment Opportunities.”
This is reminiscent of Buffett’s increase in Occidental Petroleum. According to the latest disclosure of Occidental Petroleum on September 9, Buffett’s Berkshire Hathaway’s stake in Occidental Petroleum has increased to 26.8%. On August 8, Berkshire Hathaway held a 20.2% stake in Occidental Petroleum. Equivalent to one month, Buffett spent more than 5.6 billion US dollars (nearly 40 billion yuan) to buy Occidental oil.
BYD’s turning point?
Regardless of the purpose of Buffett’s reduction, there is no doubt that since 2018, the new energy vehicle sector has experienced a vigorous bull market, and BYD’s performance has also risen.
The day before the announcement of Buffett’s shareholding reduction, BYD disclosed its 2022 semi-annual report. In the first half of the year, the company achieved operating income of 150.607 billion yuan, a year-on-year increase of 65.71%; net profit was 3.595 billion yuan, a year-on-year increase of 206.6%. 35%. Among them, the revenue of automobiles, automobile-related products and other products business was about 109.267 billion yuan, a year-on-year increase of 130.31%.
In fact, BYD’s new energy business is having its “best year yet.” In April this year, BYD announced that it will stop the production of fuel vehicles from March 2022.
After completely turning to the new energy vehicle market, BYD’s sales are booming.In the first half of this year, BYD’s new energy vehicles accumulatedsales641,400 vehicles, a year-on-year increase of 314.9%. In the same period, Tesla sold about 564,700 vehicles, and BYD surpassed Tesla to become the global sales leader.
While car sales were booming, BYD’s Hong Kong stock hit a record high of HK$333 in June, and its A-shares peaked at HK$358. Cooking oil with fire, the entire capital market has a lot of disagreements about the follow-up trend of BYD and even the entire new energy sector.
GF Securities believes that the process of rising industry market penetration from 1% to 20% is the fastest time for stock prices to rise. Since then, the company’s performance growth will pass the high-speed growth stage. Leading companies need to make breakthroughs in new technologies and new products in order to stabilize their market share and further drive the increase in stock prices and market penetration. Miao Wei, the former minister of the Ministry of Industry and Information Technology, recently publicly stated that the target of my country’s new energy vehicle penetration rate of 25% can be achieved three years ahead of schedule, that is, this year.
According to the semi-annual report data, BYD’s domestic new energy vehicle market share reached 24.7% in the first half of this year, an increase of over 7.5 percentage points from 2021.
That is to say, both the penetration rate of the entire new energy vehicle market and that of BYD Auto have reached the critical point of 20%, and the high growth in the future may never return.
As far as BYD’s own situation is concerned, compared with the smooth new energy vehicle business, BYD’s other pillar of performance, the mobile phone business, is obviously facing difficulties. The revenue of mobile phone parts, assembly and other products business was about 41.070 billion yuan, a year-on-year decrease of 4.78%.
In the first half of 2022, the impact of tight supply chains and logistics constraints on the mobile phone industry was higher than expected. At the same time, consumer demand was also suppressed by the macro environment, and global smartphone shipments showed a downward trend.
According to market research firm IDC, in the first half of 2022, global smartphone shipments fell by 8.8% year-on-year to 600 million units, the fourth consecutive quarter of decline. During the same period, the overall domestic mobile phone market shipments totaled 136 million units, a year-on-year decrease of 21.7%, of which 5G mobile phone shipments were 109 million units, a year-on-year decrease of 14.5%.
Looking further, BYD’s valuation is indeed not low, with a price-earnings ratio of more than 140 times. Legendary fund managers have advised investors to stay away from stocks with high price-earnings ratios. “Sticking not to buy stocks with particularly high price-to-earnings ratios will save you from great pain and huge investment losses. With very few exceptions, a particularly high price-to-earnings ratio is an obstacle to rising stock prices, just as a particularly heavy saddle is an obstacle to running a racehorse. Same.”
Although BYD has pulled back after hitting an all-time high, A-shares are currently down about 20% from their highs, and Hong Kong stocks have pulled back nearly 30%. The valuation quantile has reached 76% since listing.
No matter what the future trend of BYD is, the current disagreement about the follow-up trend of the company and the new energy industry may continue. Industry insiders suggest that investors ignore short-term fluctuations, look at the development of the industry with a long-term perspective, and find out the track leaders in the subdivisions.
Yang Delong, chief economist of Qianhai Kaiyuan, believes that the news of Buffett’s small reduction in BYD’s holdings has led to a relatively large adjustment in the automotive sector as a whole. It is a short-term disturbance on the news surface and does not change the long-term development opportunities and long-term development of the new energy vehicle industry. Prospects. “As one of the few industries with relatively high prosperity, new energy has outstanding performance in the semi-annual report. Investment should focus on the medium and long term, and we must look at the long-term investment opportunities of clean energy from a larger perspective.”
*This article is based on public information and is only for information exchange and does not constitute any investment advice
Original title: BYD, the abandoned son of the “stock god”