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Be like Buffet: How to invest in BYD Auto

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BYD Auto E6 Electric Car

You might not of heard of BYD Auto yet, but my guess is you will by 2012. What was once an obscure Chinese battery making company, BYD Co Ltd. (PINK:BYDDF) has morphed into one of the world’s largest manufacturers of cellphone batteries and an automotive powerhouse that’s competing with Toyota Motor Corporation (NYSE:TM), Volkswagen AG (PINK:VLKAY) and Tesla Motors Inc. (NASDAQ:TSLA).

The Oracle of Omaha himself Warren Buffet was so impressed by the company’s CEO Wang Chuan-Fu that he broke several of his cardinal rules of investing (i.e. “invest in a business that even a fool can run, because someday a fool will”) when he dumped $230 million into the company in 2008. That entitled Buffet’s Berkshire Hathaway Inc. (NYSE:BRK.B) to a 10 percent stake in BYD.

BYD’s leap from a cellphone battery maker to a hybrid/electric car manufacturer is about as unlikely as Buffet investing in a Chinese business that he doesn’t understand. It seems to be working out for both parties, though. In 2003, BYD bought what CNN calls a “Chinese state-owned car company that was all but defunct,” and within five years the company was manufacturing the F3 – China’s bestselling sedan in 2009.

Now, BYD plans to start selling electric cars in the U.S. during the first quarter of 2012. Their first model? The boxy e6, which will retail somewhere around $42,000. The all-electric car has a range of more than 185 miles and a top speed of 87 MPH. It will hit showrooms around the same time as Tesla’s Model S sedan, which will retail at $57,400. Admittedly, the e6 isn’t as sexy or as fast as the Model S, but it’ll do the same job for less money – and that’ll likely appeal to the green folks who are drawn to electric cars in the first place.

If you plan to buy stock in BYD Auto, I’d recommend doing before the press starts picking up on the company this fall. Here are three ways to invest in BYD:

1) Buy BYD shares directly on the Hong Kong Stock Exchange. The stock’s Listed as BYD Company Limited (HKG:1211).

2) Buy BYD Auto shares over the counter. BYD Company Limited trades on the Pink Sheets under ticker BYDDF.

3) Invest in an ETF or ETN that counts BYD Auto among its holdings. The Guggenheim China Technology ETF (NYSE:CQQQ) currently lists BYD Auto among its Top 10 holdings with 3.71 percent of its capital allocated to the car and battery maker.




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