How to see Buffett plus Western Oil, minus BYD?

Recently, Buffett has opened the conversion of "new and old energy" positions, adding traditional energy giant Western Petroleum and reducing the position of new energy vehicle leader BYD
.
The move has sparked speculation about whether the stock gods are hinting at the main direction of future investments.

Caitong Securities analyst Li Meicen and others in the September 7 research report "How to see Buffett plus Western Oil, minus BYD? In this regard, it is said that Buffett's addition to "old energy" and reduction of "new energy" does not mean that "old energy > new energy"
.
Buffett has long bet on political and economic themes, re-positioned "new and old energy", and the position switch reflects more of Buffett's individual stock aesthetics
.

Specifically, the reason why Buffett reduced BYD's position was mainly to make some profits after its stock price soared
.
This move is in line with Buffett's characteristics of heavy stocks, that is, moat depth (ROE stable at around 15%), safe margin foot (PE is often around 20x), "unsuitable" is not "not excellent"
.

The reason for the increase in Western oil holdings can be roughly attributed to Buffett's own emphasis on long-term opportunities in traditional energy sources, combined with his own investment experience, the fundamentals of tight supply and demand for crude oil, and the status of the United States as
a major oil power.

Add "old energy" and reduce "new energy"

Since the middle of this year, two of Buffett's deals have attracted outside attention
.

On the one hand, Buffett began to increase the position of Western Oil after the 21Q4 earnings meeting at the end of February
this year.
On the other hand, before and after BYD's 22Q2 earnings report in August, Buffett began to reduce his holdings slightly in BYD
.

Adding to Western Oil: Within 5 days of the 21Q4 earnings meeting, Buffett bought $4.
5 billion, nearly 10% of the shares; From June 17 to July 6, 30 million shares were bought, plus 100,000 preferred shares and 84 million warrants, totaling about 28%.

On August 19, Berkshire Hathaway received approval from the U.
S.
Federal Energy Management Commission to raise the purchasable stake cap to 50 percent
for Western Oil.

BYD: Between August 12 and August 24, Buffett sold 6.
28 million shares of BYD H shares, down from 20.
5% to 19.
9%.

From August 25 to September 1, the reduction of 11.
58 million shares was reduced, and the shareholding fell to 18.
9%.

As of September 2, the cumulative reduction of 17.
86 million shares, or about HK$4.
8 billion, decreased from 225 million to 207 million
.

According to the views of Caitong Securities analysts, the conversion of Buffett's "new and old energy" position does not mean that there is a certain risk in "new energy", but more reflects Buffett's long-term bet on political and economic themes, heavy positions in "new and old energy", and the position conversion reflects Buffett's individual stock aesthetic
.

Buffett's "old and new energy" deal is a long-term bet
on the political and economic themes of the times.

In 2002, he bought PetroChina to enjoy the Republican petroleum policy and the globalization dividend of China's urbanization; Buying BYD in 2009 is in line with the new energy policy and energy revolution of the Democratic Party; In recent years, the theme of global energy transformation has been increased and long-term optimistic
.

BYD: "Not suitable" is not "not excellent"

Caitong Securities analysts believe that in the position conversion, the reason why BYD chose to reduce its position is mainly to cash in part of the profits after its stock price has soared, which is in line with Buffett's characteristics of heavy stocks
.

Buffett's heavy stock preference for high ROE / moat deep, valuation is relatively low / safe margin is sufficient, from the past position, buying BYD is actually a more alternative investment in Buffett's position:

1) Excluding profitable years and large-scale buyback companies, the PE of Buffett's heavy stocks tends to be around 20x, and the ROE is stable at around
15%.

2) BYD is Buffett's rare investment in the explosive growth industry, indicating that it has been optimistic about the new energy industry for a long time, and this reduction is part of the profit realization after the company's sharp rise, and it is also in line with the aesthetics and investment framework
of its traditional positions.

Caitong Securities analysts also cited Walmart and Procter & Gamble to argue that Walmart (ROE fell back) and Procter & Gamble (PB rose sharply) after being reduced by Buffett in 2016, the stock price still achieved a sharp rise
.

Adding to Western Oil: Valuing Long-Term Opportunities in Traditional Energy

Caitong Securities analysts believe that Buffett's choice to increase the position of Western oil stems from his own emphasis on long-term opportunities in traditional energy, which can be combined with his own investment experience, the fundamentals of tight supply and demand of crude oil and the status
of the United States as an oil power.

Current crude oil prices are similar to those of the 1970s, with a long-term price center likely to rise, valuing long-term opportunities for traditional energy sources
.

1) Based on his long-term investment experience and the information obtained by American conservatives, Buffett continues to be optimistic about oil prices and increase the position of Western oil companies
.
Buffett lived through the great stagflation of the 70s and has a lot of information about American conservatives, and this round of acquisitions of Occidental is similar
to the heavy position of PetroChina.

2) The United States shale oil is difficult to expand, and the global crude oil supply is not elastic
.
Shale oil is a flexible part of the global crude oil supply, but the expansion depends on the credit bond market, the last 3 years is the point when shale oil debt matures, while financial conditions are tightening, so it is difficult to increase production
.

3) The most noteworthy point: The shale oil revolution has made the United States one of the world's largest oil producers, shifting from damaged oil prices to benefiting from oil prices, and the world's major crude oil producers are happy to see oil prices remain high
.