Buffett another classic deal: BYD 20 times in 12 years


It has never reduced its holdings in twelve years. This is another fruitful result of the "Stock God" long-term value investment.

The legend of Warren Buffett continues. His only long-term holding and heavy holding of Chinese stocks has doubled 20 times in 12 years!

In September 2008, Buffett purchased 225 million shares of BYD at a price of HK$8 per share. The total transaction amount was HK$1.8 billion, accounting for 9.89% of the enlarged share capital.

In this round of cars and new energy vehicles, BYD went crazy. As of the close of today’s noon, BYD’s A shares and H shares have risen by 17.46% and 18.84%, respectively. The share prices have broken through historical highs, reaching 162.88 yuan and 161.5 Hong Kong dollars. This is more than Buffett’s purchase price of 8 Hong Kong dollars in 2008. 20 times!

Stock price increase

Another success of the long-term value investment concept

BYD is another fruitful result of Buffett's long-term adherence to value investment philosophy.

BYD is currently the only Chinese company that Buffett holds shares and has repeatedly supported in public. According to the shareholding situation disclosed by BYD, Berkshire Hathaway still holds 225 million shares as of March 31 this year. BYD shares, accounting for 8.25%, is the company's fourth largest shareholder, which shows that Buffett has never reduced his holdings in the past 12 years!

After Buffett invested 8 Hong Kong dollars per share in BYD in 2008, just one year later, BYD got rid of the trend that had been hovering in single digits for many years, and the stock price rose wildly by nearly 11 times to 87 Hong Kong dollars in October 2009; In the past few years, the stock price has fallen to the lowest value of 12 Hong Kong dollars in July 2012 amidst the continuous decline of major banks. Even in the process, Berkshire has never reduced its holdings.

Buffett’s idea of ​​investing in BYD actually came from his good brother Charlie Munger. When Buffett Munger "Amway" This Chinese car company, said: "I found a Chinese car company, it looks like Eddie mix of students and Welch." In fact Munger is a new energy The concept of technology stocks marketed this company to Buffett.

As we all know, Buffett has always been "not cold" in technology stocks. When Munger promoted BYD, he was actually lacking in interest, but he couldn't stand Munger's repeated advocacy and decided to entrust the chairman of his wholly-owned energy company, David Sokol, to fly to China. Investigate BYD.

It is said that Sokol was moved by BYD President Wang Chuanfu who drank the electrolyte in public. Although we have been familiar with it, this way of proving the quality of our products was absolutely shocking in the eyes of foreigners at the time.

Subsequently, Buffett decided to buy a 25% stake in BYD, but Wang Chuanfu refused. He only agreed to sell no more than 10% of the stake. This may also make Buffett begin to believe more in this person who is unwilling to sell his company. In September 2010, Buffett came to China and made a special trip to inspect BYD. During the event, the stock god made no secret of his love and favor with this company.

What is the long-term value of BYD?

Munger once mentioned the pike model in his mind in his speech: Some companies are like pikes, rushing into stupid salmon schools, sweeping past like Temujin. The power of these companies comes from their models and systems. He believes that Costco and Wal-Mart are such pike-like companies, and BYD is also such a great company.

In 1995, BYD Industrial was established in Shenzhen. At the beginning of its establishment, it insisted on independent research and development of products and directly participated in the supplier's material development link. In 1997, global battery product prices plummeted and Japanese manufacturers were on the verge of losing money. By virtue of its low-cost advantage, BYD won large orders from Philips, Panasonic, Sony and even GM.

In the following three years, the company's nickel-chromium batteries surprisingly accounted for nearly 40% of the global market share, and at the same time began to develop nickel-hydrogen batteries and lithium batteries. In 2002, the company became Nokia's first lithium-ion battery supplier in China.

Just when the battery business was doing well, BYD officially entered the vehicle industry through the acquisition of Qinchuan Automobile in 2003. This was a move that was questioned and puzzled by countless shareholders at the time. In 2006, the company established Huizhou BYD to supply power batteries for the company's new energy vehicles.

In October 2016, BYD set up a joint venture company in Qinghai Salt Lake and started the development, production and sales of upstream lithium resources. In the same period, the company launched the "straddle monorail system" (cloud rail), once again entering the new urban rail transit field.

BYD is still the only enterprise group in the world that spans the two major areas of vehicles and batteries. It has the world’s leading core technologies of batteries, motors, and electronic control. The company’s power battery technology route is also changed from the lower threshold of lithium iron phosphate. The ternary lithium battery of the current layout.

According to a report released by Bank of America Securities today, the target stock price of BYD shares was raised from 108 Hong Kong dollars to 179 Hong Kong dollars.

The report pointed out that earlier it raised its third-quarter profit guidance by 600 million yuan to 1.7-1.9 billion yuan, mainly due to the rebound in electric vehicle sales due to the launch of new models, and the increase in shipments of BYU Electronics’ smartphone parts Caused by.

Based on the company's increased use of LFP blade batteries to reduce cost of goods sold and improve gross profit margin, the bank raised its earnings per share forecasts for 2020 to 2022 by 1%, 45% and 45%, respectively. In addition, the bank raised BYD’s forecasts for sales of electric vehicle batteries to external customers; and raised its passenger electric vehicle sales forecasts for 2021 and 2022 by 5% and 19%, respectively.


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