Buffett's second reduction in BYD's valuation is too high or the fuse

time:2023-01-28 18:22:26 source:clevelanddrifters.com author:Individual stock analysis
Buffett's second reduction in BYD's valuation is too high or the fuse

On Friday, September 2, 2022, Beijing time, the latest information from the Hong Kong Stock Exchange’s equity disclosure system showed that Berkshire Hathaway and energy companies under Buffett’s “stock god” reduced their holdings in BYD again on September 1. Shares (1211.HK). The last reduction took place on August 24. The average reduction price was HK$277.1016 per share. The reduction price on September 1 was HK$262.7243 per share. The number of shares reduced twice was 1.331 million shares and 1.716 million shares respectively. million shares. After the above-mentioned reduction, Buffett's companies still hold 207.14 million shares of BYD. The trigger for reducing holdings has been knocked, and there is no turning back? Buffett's trading action on BYD Hong Kong stocks has a long time span, which lasted 14 years, and the cumulative income so far has exceeded 30 times. Buffett's epic investment campaign has not been smooth, and the biggest challenge occurred in October 2009, after the stock price peaked in stages and fell sharply. BYD shares fell from HK$86.569/share to HK$9.464/share on September 26, 2011, a drop of 89%. In the process of such huge stock price fluctuations and astonishing profit-taking, Buffett's holdings have always been rock-solid, and there has been no band-action behavior. Today, 11 years later, the seeds sown 14 years ago have finally ushered in the harvest season. The reporter of "Investment Express" noted that historically, Buffett's actions to reduce holdings are often trending. Taking PetroChina's investment in Hong Kong stocks more than ten years ago as an example, after the start of the reduction, it rose and sold all the way, until it completely quit the ranks of major shareholders that need to be disclosed. Recently, Buffett has aggressively bought traditional energy company Occidental Petroleum in the U.S. stock market and began to slash his lucrative new energy positions. This is indeed an important signal worthy of investors' attention. “The valuation is so high that it makes nosebleeds” or the trigger for reducing holdings Regarding BYD’s investment, Buffett’s partner Munger once said in 2017: “This investment in BYD is also impossible for us to do in the early days. When I first came into contact with BYD, it was when BYD's share price was particularly low, and it was a stock that met Graham's standards. At that time, BYD had already stepped out of the entrepreneurial stage, but it was still a small company. "Graham said Strict liquidation value is the basis for protection to establish a margin of safety. When it comes to this investment guru, people often think of "cigarette butt stocks". But Munger also said that the valuation of BYD's investment is difficult, he said: "We also learned something from it. When we initially bought, we knew that according to the situation of BYD at the time, venture capital should be willing to pay. Three times the price. From a VC perspective, BYD is cheap. We believe that from a VC perspective, BYD is worth investing because Wang Chuanfu has made some great achievements.” stock, but you have to have a different insight and vision than others to find its value," Munger said. At last year's Daily Journal shareholder meeting, Munger mentioned BYD, he said: "When we held BYD for the first five years, the company's stock price basically did not increase, and the two years began to skyrocket because he was in a very favorable position. Industry status. Seize the opportunity of the transformation of gasoline vehicles to electric vehicles." "I rarely hold companies like BYD, and the valuation is already nosebleed. I have no system to hold BYD, and I am also Continuous learning, we really like this company and its management, and we also tend to continue to hold." This annual meeting will take place at the end of February 2021, when BYD's PE in Hong Kong stocks was about 170 times. This is already a company that Munger calls "a nosebleed valuation". At present, BYD's rolling price-earnings ratio is still more than 100 times. It is not difficult to see that the high valuation is likely to be the direct trigger for Buffett to press the sell button. The effect of the reduction of holdings on the market will continue for a period of time. Buffett's holding position in BYD Hong Kong stocks is very large, and the liquidity of the Hong Kong stock market is far less than that of A shares. This is also the share that Buffett has sold every time in the past half month. Quantity is only one reason why it is a small percentage of its total holdings. Comparable with this should be Tencent Holdings (700.hk), the South African major shareholder who has held the stock for many years recently announced a continuous reduction of positions, selling a certain number of shares each trading day. It is difficult for these important shareholders to reduce their holdings overnight, and it is a trending behavior that lasts for a long time. But it's also because of this that continued selling pressure could hamper the rise in the company's stock price for quite some time. Of course, the effect of this obstacle will also show a diminishing marginal situation. With the passage of time, the secondary market will become accustomed to the reduction of holdings, and the valuation of related companies will also fall back to a range with more investment value, gradually attracting new investors. Do more money to buy, long and short sides to reach a new balance.

(Responsible editor:Individual stock recommendation)

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