Be like Buffet: How to invest in BYD Auto
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.
Buffet buys 4.4 million shares in Fiserv, Inc. (FISV)
In something of a departure for the Oracle of Omaha, Warren Buffet seems to have taken a liking to a technology stock: Fiserv, Inc. (NASDAQ:FISV). The heralded chief of Berkshire Hathaway Inc. (NYSE:BRK.B), slightly trimmed down positions in Kraft Foods (NYSE:KFT) and Procter & Gamble (NYSE:PG) for a sexier bet on Fiserv – a company that provides e-commerce and bill payment services to banks worldwide.
Nearly 70 percent of all online banking in the U.S. utilizes Fiserv technology at some point, and the company seems be positioning itself for big gains in the future. They’ve bought back more than $2.3 billion in shares over the past five years, and they’re at the leading edge of what’s an undeniable trend: mobile and web-based banking. As more and more clients move online, they’ll be using Fiserv’s technology, and that’ll spell more greenbacks for this NASDAQ company. If that’s good enough for Buffet, that’s good enough for me.
Benjamin Graham’s Principles in The Intelligent Investor
Among the first value investors in modern trading history, Benjamin Graham’s concepts are so fundamental to the views of most stock investors that they don’t even realize the ideas once had to be codified! Slowly and surely, Graham took a lot of the emotion out of investing in stocks, and, of course, his ideas helped spawn some of the greatest investors of all time including Warren Buffet (CEO of Berkshire Hathaway, Inc., NYSE:BRK.A).
There are five key principles that recur again and again in The Intelligent Investor. To echo Warren Buffet, here are the key elements of Benjamin Graham’s approach to investing:
1) When you buy a stock, you’re not buying a symbol or a price movement; you’re buying a stake in a real live company.
2) The market makes steady swings from overvalued to undervalued. Intelligent investors sell when the market has overvalued specific stocks and the buy when stocks are undervalued.
3) Pay attention to a stock’s current price. Future stock values are relative. If you get in when the price is high, your return will be low.
4) Give yourself a “margin of safety” when you invest. Because all stocks carry risk of loss, you can only minimize that risk by buying when prices are low, thereby creating that safety net.
5) You must invest on a principled foundation. If you can control your emotions in bear and bull markets, you can profit in either one.
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