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Barron's on BYD: China Play May Buffet Buffett


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Guest kumar

A wager on auto and battery maker BYD could go south on the Oracle of Omaha.

 

http://online.barrons.com/article/SB50001424053111904548404576397773092297548.html

 

....controlled by entrepreneur Wang Chuan Fu—described by Buffett's colleague Charlie Munger as "a combination of Thomas Edison and Jack Welch"—isn't looking so good. Buffett's paper profit is down to $430 million, and analysts have been cutting estimates for BYD, which could plunge another 20% to 25%. "I have been bearish on BYD for over a year now, because I just don't buy their electric-car story," says Scott Laprise, an analyst for CLSA in Beijing. He has a HK$16.68 price target, the lowest of any analyst....This year, BYD's total car sales are down 22%, and its gross margin slid to 11% in the first quarter, from 27% a year earlier....Another problem is beleaguered cellphone firm Nokia (NOK). The Finnish company's woes are weighing on BYD's 66%-owned subsidiary BYD Electronics, a contract handset maker. Nokia accounts for more than 40% of the unit's revenue....

 

 

 

 

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A wager on auto and battery maker BYD could go south on the Oracle of Omaha.

 

http://online.barrons.com/article/SB50001424053111904548404576397773092297548.html

 

....controlled by entrepreneur Wang Chuan Fu—described by Buffett's colleague Charlie Munger as "a combination of Thomas Edison and Jack Welch"—isn't looking so good. Buffett's paper profit is down to $430 million, and analysts have been cutting estimates for BYD, which could plunge another 20% to 25%. "I have been bearish on BYD for over a year now, because I just don't buy their electric-car story," says Scott Laprise, an analyst for CLSA in Beijing. He has a HK$16.68 price target, the lowest of any analyst....This year, BYD's total car sales are down 22%, and its gross margin slid to 11% in the first quarter, from 27% a year earlier....Another problem is beleaguered cellphone firm Nokia (NOK). The Finnish company's woes are weighing on BYD's 66%-owned subsidiary BYD Electronics, a contract handset maker. Nokia accounts for more than 40% of the unit's revenue....

 

 

 

 

 

Buffett & Munger are holding BYD like they are with The Washington Post - forever. The naysayers will always have thier day, but in the long term evolution the value investors win. Watch this video and you will understand why BYD is held by Berkshire Hathaway.

 

From the Cloud to the BYD Car:   http://www.youtube.com/watch?v=xVrlivwAiOU&feature=related

 

I watched the video and I am wondering that is this thing even safe? That must be a whhole lot of distractions during dirving?!

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I'm a bit confused.  The Barron's article and others talk about their trouble in getting the shares issued, and having to raise less than they wanted to, but then you read that the issue was 21 times oversubscribed.  Huh?  http://www.bloomberg.com/news/2011-06-23/buffett-backed-byd-online-offering-21-times-oversubscribed-1-.html

 

What kind of gamesmanship is going on with this?  What does this mean for the Shenzen market as a whole? 

 

Here is one interesting article that really does start to get to the heart of the questions needing answering in order to find the likely winners in the competitive battery space:    http://autonews.gasgoo.com/commentary/a-battery-of-questions-for-electric-vehicle-invest-110621.shtml

 

On reading that article, and trying hard to be fair-minded, I do see BYD as doing pretty well on that list of requirements, and the list makes sense to me.  They are one of the few battery makers working hard on all those categories, and making progress to prove their technology.  This keeps me intrigued, but picking one of the winners in a crowded field has always been at best intelligent speculation to me.  We holders have had our asses handed to us in BYD this year.  But then shares are up 10% over past 2 days.

 

I'm starting to think this is "Welcome to Investing in China."  Reading "Mr. China", and I am becoming even more aware that Westerners have no real clue about the Middle Kingdom. 

 

Disclosure:  Long BYD, but with awareness that this is beyond my circle of competence. 

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Guest Hester

 

....analysts have been cutting estimates for BYD, which could plunge another 20% to 25%.

 

It's so hard to take this article seriously when stuff like this is written.

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It's driving with your head in the clouds.

 

I would like to be a little more forceful: "Its driving with your head up your ass."  The video is as fine an example of hype as there is.

 

Yep.  Add on top of that that the kids in the back would have been happier with something in their laps, like, say, an iPad (or even a xoom!)

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