Warren Buffett sold BYD and is preparing a new $10 billion acquisition

Back in 1989, Warren Buffett said: ‘When we own pieces of exceptional companies with exceptional management, our favorite holding period is forever.’ However, despite these stories, history shows that even the ‘Oracle of Omaha,’ as he is affectionately called, is not immune to portfolio changes. Sometimes it is due to the need for balance, sometimes due to the assessment that the price has peaked, and sometimes for strategic reasons.

In the last 11 quarters, Berkshire Hathaway has sold more shares than it has bought, and one of those moves has particularly caught attention. This is the complete sale of its stake in the Chinese electric vehicle manufacturer BYD, an investment that has proven to be one of the best in the history of Buffett and his late partner Charlie Munger.

A 3,980% Increase

Berkshire entered BYD in September 2008, amid the global financial crisis, when the market was in free fall. Buffett and Munger then recognized the vision of founder and CEO Wang Chuanfu, who first created one of the largest battery manufacturers and then ventured into the automotive business.

An investment of $230 million soon grew to a value of nearly $9 billion. BYD has since become the largest electric vehicle manufacturer in the world, surpassing Tesla in sales in 2023 and 2024, and its revenues and production increasingly rely on foreign markets, including Europe. Additionally, the stock price has increased more than eightfold since the beginning of 2020, resulting in an overall return of nearly 4000% since Buffett’s entry in 2008.

Why the Sale Now?

Since August 2022, Berkshire has gradually begun to reduce its stake, and by the first quarter of 2025, it will have completely exited the company. The sale came after the Chinese electric vehicle market began to show signs of saturation and strong competition. BYD’s deliveries stagnated over the summer, and margin pressure became increasingly significant. Despite this, BYD retains a significant advantage over competitors due to vertical integration, as BYD produces its own batteries, chips, motors, and most other key components, allowing it flexibility and lower costs. It should also be noted that it has its own fleet of ships for global deliveries, when discussing flexibility.

A Historical Pattern Before Major Declines

This is not the first time Buffett exits an extremely profitable investment precisely when the market becomes overheated. A similar situation occurred in 1998 and 1999 when he reduced exposure to certain technology companies just before the dot-com bubble burst. Also, before the financial crisis of 2008, Buffett gradually reduced exposure to banks and insurers that subsequently suffered greatly.

For investors, Buffett’s move with BYD can be seen as a warning because when even the most famous stock investor of all time decides to ‘take the cream off the top,’ it often means that turbulent times are ahead for the market.

Shifting Focus to Stable Businesses

And while Berkshire Hathaway has completely withdrawn from Chinese BYD, Buffett is not keeping cash idle. According to reports from American media, negotiations are underway to acquire the petrochemical division of Occidental Petroleum (OxyChem), valued at around $10 billion. This would be Berkshire’s largest deal since 2022, when it acquired the insurer Alleghany for $11.6 billion.

OxyChem produces widely used chemicals, from drinking water treatment to battery recycling and paper production. In just the last 12 months, this division has generated nearly $5 billion in revenue. Buffett has long been associated with Occidental: Berkshire owns about 28% of the company, having provided financial support for its acquisition of Anadarko in 2019.

Berkshire currently holds a record $344 billion in cash and treasuries, meaning it has ample room for significant moves. Buffett has repeatedly emphasized that he prefers to invest in ‘good businesses’ rather than hold cash, but that they are becoming increasingly difficult to find. For this reason, entering OxyChem can be viewed as a strategic move and an investment in stability at a time when global markets are showing signs of saturation and volatility.