Warren Buffett called electric-car maker BYD Company Ltd. “extraordinary” and said chip manufacturer Taiwan Semiconductor Manufacturing Co. is a “fabulous enterprise.” That hasn’t stopped him from selling shares of both firms.

“We’ll find things to do with the money that I’ll feel better about,” the Berkshire Hathaway Inc. chairman and chief executive officer said of BYD in an interview with CNBC in Tokyo Wednesday. He said Berkshire wasn’t in a hurry to reduce that stake after recently trimming its holdings of BYD H shares to 10.9% from 11.13%, according to a filing this week.

The billionaire investor took credit for Berkshire’s investment in TSMC amid speculation that one of his investing deputies picked the stock. He said the decision to reduce its stake in the business by 86% in the fourth quarter — which could have fetched $3.7 billion assuming the shares were sold at the average price over the period — resulted from concerns over geopolitical tensions between China and Taiwan, conditions he described as being outside of the company’s control.

“I re-evaluated that part of it,” Buffett said. “I didn’t re-evaluate the business, the management, or anything of the sort.”

Eoin Treacy's view

Warren Buffett has tended to be an investor in the USA and a trader internationally. There are two obvious reasons for choosing to sell out of both BYD and TSMC. The first is valuation. The second is politics.

Both shares have appreciated significantly over the last couple of years. BYD is now facing into a price war in China as Tesla cuts prices. This happening as the costs of ramping up production will need to be recouped so competition is likely to be increasingly cutthroat. The share price has been ranging in a volatile manner for almost three years and has type-3 top formation characteristics. The region of the 1000-day MA is a big psychological support level for the share.
TSMC has an enviable position as the premium provider of the most efficient chips in the world. However, the pandemic spending splurge is unlikely to be repeated so the most likely scenario is prolonged ranging rather than trending.

The question of geopolitical risk and the increasingly fraught relationship between China and the USA was probably also a factor. However, that was unlikely to have been the only consideration. More telling will be in how reluctant Berkshire is to partake in future China investments.