“The big money is not in the buying or selling, but in the waiting” — this is not just a quote by Charlie Munger, it is what the billionaire philanthropist, who died on November 28, wholeheartedly believed in.
Chinese electric vehicle maker BYD was Munger’s favourite stock. He first bought about 220 million shares, then priced at $230 million, for Berkshire Hathaway in September 2008.
Fast forward to 2023, according to a Berkshire Hathaway filing cited by CNN, the firm held about 7.98% of BYD by late October. Those shares are now worth $2.4 billion, as per the report. “I have never helped do anything at Berkshire
But why did he choose BYD over Tesla?
At an annual meeting in 2009, Warren Buffet and the vice chairman of Berkshire Hathaway Munger were asked about the reason for their choice. Buffet introduced Munger as the team leader on BYD — who gets really excited about it so he may have to control him.
He was right. Munger amped up as he spoke about the Chinese EV maker, its founder and the team’s “miracles.”
Also Read: Charlie Munger dies at 99: Here are 10 memorable quotes by the legend on investing and life
Although BYD's founder is only 43 years old, the firm is not some early stage venture capital company. It is one of the main manufacturers in the world of the rechargeable lithium battery and it achieved that position from a standing start at zero under the leadership of its Founder Wang Chuanfu.
“They went into cell phone components and developed a huge position. And then finally, not satisfied with having worked a couple of miracles, he decided he would go into the automobile business with nearly zero experience,” Munger had said.
He went to applaud Chuanfu as someone who was able to create the best-selling single model in China with very little capital. That's against competition like Chinese joint ventures, all major auto companies of the world and technological marvels with way more capital.
Over 15 years ago, Munger spotted lithium batteries as the need of the future, something that every utility company would need. “We have to use the direct power of the Sun and we can't do that without marvellous batteries and BYD is in the sweet spot on that stuff.”
The ‘not normal’ Wang Chuanfu’s BYD
Buffet’s aide went on to state that whoever engaged in an automobile business in the past had made every part. But what BYD did was not normal — it’s very unusual, he said. It was a privilege to have Berkshire associated with a company that is trying to do so much for humanity.
“This is not some unproven highly speculative activity. What it is is a damn miracle and I warn you Chuanfu has hired 177,000 engineering graduates, all at the top of the classes and so you get a remarkable aggregation of human talent.”
“It may be a small company but its ambitions are large and I don't want to bet against 177,000 Chinese engineers led by Wang Chuanfu,” he said in 2009.
Would Charlie Munger have chosen Tesla in the present day?
In an interview with CNBC International earlier this year, Munger was asked if he would prefer Tesla or BYD as an investment. The answer was easy for him. Why? He said, “Tesla last year reduced its prices in China twice. BYD increased its prices. We are direct competitors. BYD is so much ahead of Tesla in China ... it’s almost ridiculous.”
In the February interview, he also noted that last year, BYD made more than $2 billion after taxes in the auto business in China. “If you count all the manufacturing space they have in China to make cars, it would amount to a big percentage of the Manhattan island, and nobody had ever heard of them a few years ago.”
Munger also said Chuanfu was unusual and called him a genius and a workaholic, whereas Tesla CEO Elon Musk, he said, was talented and “peculiar.” He has previously said what Musk achieved in the car business was a “minor miracle.”
Meanwhile, Berkshire Hathaway has sold more than 137 million shares of BYD since the middle of 2022, according to its previous statements, CNN reported.
