anders

I believe the article 'How Inflation Swindles the Equity Investor' best describes what to do when it comes to inflation :)

The amount of China’s auto production was approx 18.3M units for 2010 -- a 40% increase yoy. For 2009 the figure is 13M, 2008 its 9.35M and, 2007 8.5M units were produced. In 2007 BYD produced about 86'000 units -- a 1% market share, in 2010 their market share had grown to approx 3% (520t units). The F3 model accounted for nearly 98% of production in 2007, and I guess approx 60% in 2010. Two things appears to be valid; Over time, the F3 model becomes less important as a %age of total revenue and, BYD market share is increasing. In Jan-11 the auto production in China was about 1.8M units, a 11% increase yoy, so it would not be unrealistic to assume a 20M unit auto production in China 2011. A 3% market share means 600 000 auto production from BYD. Apart from this, BYD will introduce Buses, SUV and other vehicles to the market as well as entering USA and other countries with their products. Aside from the auto segment. 'The handset components & assembly services' sales increased 40% 2010 (21% in 2009) and now stands for 44% of total revenue. This segment is also likely to increase due to the popularization of smart phones. The risk of course being that one customer stands for 37% of all purchase orders. The rechargeable battery segment (and in my opinion the popular discussed 'future technology segment') stands for 10% of total revenue. I would not put too much weight on this area and believe that sales will be in line with 2010. This segment will be interesting when cost of producing solar power comes down in line with cost for coal power five years out. If we assume a 600'000 auto production in 2011, a 7% increase in 'handset components' and same level in 'battery' sales, our total revenue will land around 52B RMB for 2011. In 2010, profit margin declined 50% to 5% largely due to an 46% increase in Selling & distribution cost. I believe that this effort was made to meet future demand in auto segment as well as new positioning in new markets. The margin will probably revert to previous levels and say, on a 8% profit margin the profit would be above 4B RMB. Taking the price of the stock 23,6 RMB we get multiples of 13 on profit and around 8,8 for the business itself. That is a good price for a company that has a Total Revenue 3YCAGR 30% (5y 48%) and profit 3YCAGR 16% (5y 38%) -- it is a wonderful company at a fair price is it not? ;) I am simplifying this analysis of course but hopefully it gives the big picture. I have started to buy the company at these levels. BRK bought the BYD rights issue @ 8HKD/share. I find it very hard to believe that the price will come down to this level again -- for that price to appear we need a crash in the market. And not to forget, BRK bought it September 2008, BYD has evolved since then. Thoughts anyone? ::)

Thanks for all the inputs :) Ross, i misunderstood your argument with coke, sorry about that.. I believe that WoW will continue to grow.. subscribers have grown with 1.5-2 million per year since 2004 hence it is not illogical to assume that this will continue.. about 6 million subscribers are in asia and new gamers are entering the arena.. Sure, at some point gamers must enter real life but many play different games from age 10 to 35 which consequently gives a stream of potential cash flow for 25 years. And this is just one leg in the business, CoD is growing, Starcraft is growing, Guitar Hero is growing, Dj is growing and more. But I also come to realize that the industry is changing faster then I previously thought so there are reasons to be cautious.

Thanks for all great posts :) - Valuegeek: Im not sure about 'several hundred millions of insider selling' -- pls see insidercow.com for information.. Sure insiders are selling but not enough to cause my stomach to churn.. Kotick exercised options and then sold them, I think these options come from the vivendi deal.. If you want scary nrs then take a look at Apple insider selling.. In general, I dont think insider selling info give you much (if it does not occur at 52 week low) There are many reasons to sell, buy a new house, boat, fund children's collage etc etc.. But there are only one reason to buy a share -- the expectation to earn money. - About the hits biz, WoW has been around for 16 years.. take a look at the subscriber nrs below: According to Blizzard: 12.0 million Oct 7 2010 11.5 million Dec 23 2008 11.0 million Oct 28 2008 10.0 million Jan 22 2008 9.0 million July 24 2007 8.0 million Jan 24, 2007 7. 0 million Sept 6, 2006 6.0 million March 2006 According to MMOGData: 5.5 million Dec 2005 0.75 million Jan 2005 0.25 million Jan 2004 I would not call this a fad, something that just will go away...and with the new expansion pack launching dec 2010, there are good chances that the trend will continue.. - Ross812... why would WoW 'just die' ?? About the KO argument... Here is a small piece from brk shareholder letter 1993: --- I can't resist one more quote from that 1938 Fortune story: "It would be hard to name any company comparable in size to Coca- Cola and selling, as Coca-Cola does, an unchanged product that can point to a ten-year record anything like Coca-Cola's." In the 55 years that have since passed, Coke's product line has broadened somewhat, but it's remarkable how well that description still fits --- Sales of syrup in 1896 were 116,492 gallons versus about 3.2 billion in 1996. Coca Cola probably has a very bright future ahead of them. ;) - Partner24: Great questions.. That is what I am trying to figure out.. will the moat expand or contract ? ATVI has given a hint that they may wish to utilize blizzard to take console games such as CoD to subscribe basis which is interesting.. I think they will be able to raise prices in line with inflation and I think the industry is fairly immune against mood swings in the economy.. -Oplhlman2: I think ATVI will try to push their console business to their blizzard platform.. The 'apple effect' is really interesting.. wasnt apple like msft 20 years ago, when msft started to grow bigger and bigger ?? maybe one should start adding msft shares over the next coming 20 years ::) I think you are right about Steam and Valve... they could pose a serious threat.. or maybe ATVi just buy them out?

...and I need others to tell me not to rush in and marry her. "Forget about market share -- what you want is share of mind" Buffett said during his MBA speech... I am a fan of the gaming industry -- started with the commodore64 and the development within the industry has been an incredible voyage.. Not long ago ActivisionBlizzard's (ATVI) CEO Robert Kotick said:"There are a lot of new social gaming companies that are emerging and take mindshare -- not from our consumer, [because they're] a different demographic"... For me, this statement means that Kotick 'gets the point' and is on the path of creating a good portion of mindshare within the gaming industry and, with currently over 12 million players of World of Warcraft (WoW), record-breaking sales on 'call-of-duty', it seems that he is on the right course.. About half of those 12m WoW players, are Asians paying approx 6 cents/hour and half are from europe & usa paying 12-15 USD per month putting the total WoW subscription revenue at around $1.04 billion.. Jumping to another angle: ATVI have experienced a multiple compression from an 5y average of approx 60 to today's 15 (forward looking).. Owner earnings have gone from 350 in 2007 to around 950 in 2010 (calculated on half-year earnings then adding 50% half-year earnings).. The owner earnings growth has been 30,5% during last 9 years, 28,5% during last 5years, 38,2% during last 3years so if we would do a DCF (to illustrate the point) with an input of growth 10% and discounted at 15% we would get a price around 12usd. Reverting instead -- with a current market-price at 11, it means that mr market believes that the company will grow at 2.5% at a 10.5% discount. Jumping to the balance: They have a current ratio of 3,64, no longterm debt.. Yes they do have a lot of goodwill and other immaterial but adding back treasury stock to the book value, it doesn't seem so bad. Moreover, the managers own a quite large stake in the company, ATVI buy back their stock, the purchase price provides a margin of safety, with a assumed growth rate of 10% and cash yield of 7% I feel I have a quite attractive lady. I have a large stake in the portfolio and I have become blind of love for this company..."All I want to know is where I am going to die so I'll never go there".. Everybody here can read a financial statement and I would love if someone could give me a hint 'where I am going to die' with ATVI.. ::) All the best, /A