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BYD stock: Crash despite brilliant figures, that's why! - Financial Trends

BYD stock: Crash despite brilliant figures, that’s why!

Dear Reader,

Let’s start directly with the most important thing:I am still absolutely convinced of the BYD stock. The reason for this is the brilliant figures that were recently published. Just as strong as my positive attitude towards this stock was my astonishment that the stock moved strongly southward in the past few days. Last Monday, it was still trading at 34.92 euros. Today, on September 1, we are faced with quotations of around 29.70 euros. That’s a steep loss of around -15%.

Figures brilliant, share price performance disastrous

Such a crash is hardly to be explained at first sight. Because BYD reported brilliant quarterly figures last Monday. In Q2 2022, profits rose to CNY 0.78 per stock. In the previous quarter, however, it was only CNY 0.28. Analysts had expected only CNY 0.58 for the last quarter. The stock market’s reaction was all the more astonishing. The stock began the unpleasant decline already described above.

It was Buffett, wasn’t it?

While many analysts are still looking for “rational” reasons for the crash, the cause seems to be rather based on irrational fears due to misunderstandings. Warren Buffett, the big investor, currently owns about 20% of all BYD stock and has for 14 years. On Monday, a sell order suddenly appeared in the clearinghouse of the Hong Kong Stock Exchange, roughly equal to Buffett’s current stake. The reaction to such news is understandable. However, so far there is no confirmed information whether this sell position is really from Buffett. At the same time, the question arises for me why Buffett, should he really have serious intentions to sell, should give this position as a whole into the market. After all, this order alone exerts massive pressure on prices and thus reduces his sales proceeds. Here, a gradual release would be customary in the industry. Specifically, I do not expect this order to come from Buffett’s direction.

Rumors about lithium supply

What is quite tangible, however, is that there are concerns that BYD could run into problems with its lithium supply. While the company does have a stake in mines, the demand for this raw material for rechargeable batteries is constantly increasing. After all, the e-vehicles have to be equipped with them. However, there is still no concrete information about even a possible “lithium emergency”. Incidentally, this would probably also affect all e-vehicle manufacturers. And there is no news on this from them either.

Stock still worth holding and also worth buying

I stand by my assessment that the BYD stock is a very good hold, but also just now buy position. From a chart perspective, the next support can be identified in the area around 25-27 euros. Here, the stock had found support several times in May. In my opinion, this area offers itself as a post-buy zone. Nevertheless, make sure that you do not overweight this stock in your portfolio. As we have just seen, it is very volatile.