Jul 26, 2024
Warren Buffett is renowned for his preference for long-term investments, famously stating that his favorite holding period is “forever.” However, this does not imply that he never trims his positions.
In a recent filing to the Hong Kong Stock Exchange, Buffett’s company Berkshire Hathaway disclosed that it had sold 1,395,500 shares of Chinese electric vehicle giant BYD. This transaction reduced Berkshire’s stake in BYD from 5.06% to 4.94%.
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According to the Hong Kong Stock Exchange regulations, shareholders holding 5% or more of a listed company’s shares must disclose their holdings. By dropping below this 5% threshold, Berkshire is no longer required to disclose further sales of BYD shares.
The investment proved highly lucrative. In 2008, Berkshire Hathaway acquired 225 million shares of BYD for $232 million. By the end of 2020, as stated in Berkshire’s shareholder letter, their stake was valued at approximately $5.9 billion. Berkshire has been reducing its stake in BYD since late 2022.
Meanwhile, in the U.S., EV giant Tesla has also been making headlines. The company’s shares fell 12% following its latest earnings report. In Q2, Tesla’s automotive revenue declined 7% year over year.
The drop in Tesla stock also affected CEO Elon Musk’s personal wealth. According to Forbes’ real-time estimates, Musk’s fortune decreased by more than $16 billion after the earnings release.
Despite these fluctuations, the EV industry has experienced substantial growth globally over the years. According to the International Energy Agency, global EV sales totaled nearly 14 million in 2023, accounting for nearly one in five cars sold.
Moreover, many experts still see significant upside potential in major players within the industry. Here’s a look at three companies that Wall Street finds particularly attractive.
Tesla (TSLA)
In 2023, Tesla company achieved a significant milestone by delivering 1,808,581 EVs, which represents a 38% increase from 2022.
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In the U.S., Tesla’s dominance in the EV market is particularly evident. Data from Kelly Blue Book indicates that 55% of the EVs purchased by Americans in 2023 were Tesla products, highlighting the brand's strong foothold and consumer preference in the domestic market.
However, as mentioned earlier, Tesla shares have experienced considerable volatility. They doubled in value in 2023 but have seen a decline of 10% so far in 2024.
Wedbush analyst Dan Ives sees a revival on the horizon. The analyst has placed a price target of $300 on Tesla, implying a potential upside of 34%.
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Ford (F)
Given that Ford's best seller is the F-Series of pickup trucks, the company isn’t considered a pure-play EV stock. However, the automaker has made significant strides in electrifying its lineup.
In November 2019, Ford unveiled the Mustang Mach-E, a five-door electric compact SUV. This model hit the market in December 2020 and clinched the 2021 North American SUV of the Year Award. Moreover, Ford launched the all-electric F-150 Lightning pickup in April 2022, marking another significant step in its EV journey.
In Q2 of 2024, Ford’s EV sales increased by 61%, reaching 23,957 vehicles. Although EVs represent a small part of Ford’s business, the company highlighted its unique position in the industry, stating, “With 44,180 total EVs sold for the first half of the year, Ford brand electric vehicles trail only Tesla. Mustang Mach-E and F-150 Lightning are drawing customers from other brands; 62 percent of F-150 Lightning and 54 percent of Mustang Mach-E sales are new to Ford.”
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Despite this rapid growth, Ford’s EV venture may take time to become profitable. In its latest earnings report, the company said that it continues to expect a full-year loss of $5 billion to $5.5 billion for its EV segment. Following the earnings release, Ford shares fell 13% in after-hours trading.
Nonetheless, Barclays analyst Dan Levy has an “Overweight” rating on Ford with a price target of $16 — around 43% above where the stock sits today.
ChargePoint Holdings (CHPT)
ChargePoint doesn’t produce any electric cars, but it could still be well positioned for the EV boom.
The company has one of the largest EV charging networks in the world. It has more than 306,000 activated ports in both North America and Europe and has delivered more than 246 million charging sessions since its inception.
As more EVs are projected to populate American roads, the charging solutions provided by ChargePoint could become increasingly essential.
The stock, however, hasn’t been a hot commodity. Over the last 12 months, ChargePoint shares have fallen a staggering 74%.
That could give contrarian investors something to think about. Needham analyst Chris Pierce has a “Buy” rating on ChargePoint and a price target of $3.00, implying a potential upside of 47%.
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Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
