Buffett Made $1 Billion In Paper Profit From BYD

There are a lot of benefits when you are Warren Buffett, a lot more people want you to invest in their companies. Of course, you have to achieve a lot before you get to where Buffett is. It is true that when you have "made it" the money making will get a lot easier. To be fair to Buffett, he has a lot of bankers showing him deals or alerting him on interesting companies all the time. Plus he has the capital to do things immediately, I remember being shown deals that I thought would be more than decent but would have had to go around trying to convince people with money to invest in them - its a drag. By the time you line up some interest, there will be issues on how to get the commission and then who gets what and among how many people - its really a drag.

Back to BYD, it probably took a lot of foresight and guts to invests in BYD because no matter how good the battery is, there are plenty of competitors out there. The technology could be surpassed in the blink of an eye. Even when you have a great product, you still have the bigger hurdle of latching onto the genuine critical mass buyers, i.e. the Chinese government or any of the major automakers, bearing in mind that most of the carmakers also have been developing their own specialised battery product. Not an investment for the faint hearted.

Battery and electric car producer BYD Co plans to list itself on the Shenzhen Stock Exchange next year with a 100 million share issue to raise funds for its new energy vehicle projects, according to a senior company official.

The Hong Kong-listed company, partly owned by US billionaire Warren Buffet, got the necessary shareholder approval for the public float at the annual general meeting held in Shenzhen on Tuesday.

"We expect to complete the entire listing procedure before Sept 7 next year," Wang Jianjun, deputy general manager of BYD Auto Sales Co Ltd, told China Daily.

The company had last year toyed with the idea of a mainland public float of 58.5 million shares on the Shenzhen or Shanghai bourse. The present plan to raise funds is a revival of that proposal which was put on hold after China suspended IPO approvals for nearly a year due to the global financial crisis.Proceeds from the issue would mainly be used for funding the company's lithium-ion battery production, automobile research and development, expansion of products and parts, as well as a solar battery program, with the rest to be used for working capital needs, said Wang.

"BYD will focus on the development of electric cars in the next few years and would make further efforts to lower costs and improve the performance of BYD electric vehicles, to popularize it among Chinese consumers," he said.

BYD will also start selling its F3DM plug-in hybrid cars to individual consumers from next month.

The hybrid model also figures in the first batch of new-energy vehicles that have got regulatory approval for production and sale from the Ministry of Industry and Information Technology.

"We are applying for the government subsidy for our F3DM, which qualifies for the highest level of as much as 50,000 yuan per unit," said Wang. "The subsidy will help promote the sales of clean vehicles."

BYD's Chairman Wang Chuanfu said earlier this month that billionaire Buffett is contemplating increasing his 10 percent stake in the company. Buffett had acquired the 10 percent stake for $230 million last September.

Since the deal was announced, the automaker jumped fivefold in Hong Kong trading helped by Buffett's investment and rising demand for fuel-efficient vehicles. Buffett's Berkshire Hathaway Inc has also earned a $1 billion paper profit from its investment.

BYD aims to more than double vehicle sales this year to 400,000 units. First-half sales more than doubled to 176,814, helped by demand for the F3, China's fourth bestselling car, according to the China Association of Automobile Manufacturers.

Current PE Ratios Comparison & Buffett's Latest Interview

In a recent interview with Warren Buffett:

On whether he will cash out of Goldman Sachs:

No, no, no. I will keep those Goldman warrants right through their full -- they've got four and a quarter years or so to run. But I think we'll make a lot of money out of those.

On the possibility of the United States losing its AAA Rating:

As long as you're issuing money and you're issuing debt in your own currency, you can print money. The U.S. -- no, I think we will have a AAA for not only as long as I live, but as long as you live, which is more important.

On whether unemployment will continue to rise:

It’s going higher—business has not bounced back. We have not come off the bottom yet. It will work out in the end. Since 1776 it’s been a mistake to bet against America . America solves its problems. How soon, nobody knows. But we have not come off the bottom yet. And it will work out in the end.

On inflation in the United States :

What we’re doing raises the probability significantly of very significant inflation down the road—not this year or next year or the year after that, but we’ve taken actions and they were appropriate actions… it will have consequences and nobody knows exactly what they will be and how effective we will be at draining a system we’ve been flooding, but the probability of significant inflation has gone up.

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Bespoke came up with the current P/E ratios for these countries. Please note that its current ratios and not forward ratios. Below is a chart showing these valuations. As shown, Russia currently has the lowest P/E ratio at 6, followed by Italy (10) and France (11). At 14, the US is more attractive based on its P/E ratio than most countries. Taiwan has the highest P/E at 60, and the UK is surprisingly bad at 34. It's valuation is worse than China's. Germany also has a very high P/E ratio at 27. Malaysia's is at a fair 18x.

p/s photos: Reon Kadena

Insiders' Selling & Beating Warren Buffett At His Own Game

There are plenty of investors who monitor the buying and selling by company insiders, i.e. senior management and substantial shareholders. There were two major waves of buying by insiders, in November last year and March this year, and they have proven to be very astute in timing the markets. Now insiders have been net sellers for 14 consecutive weeks. That might not be as bearish an indicator because the length of time is a lot longer than usual, indicating that this time the insiders could be wrong. Secondly, the fact that the net selling is so prolonged may hint at more long term institutional and private funds are re-entering the markets. Even insiders cannot always be right.

By Steven Russolillo (WSJ)

Insiders are selling their company shares at a pace not seen in two years, providing further evidence that the recent stock-market rally may be coming to an end.

Insiders of S&P 500 companies have now been net sellers for 14 consecutive weeks, according to research firm InsiderScore.com. That marks the longest stretch since June 2007, which was just a few months before credit markets started shutting down and a bear market for U.S. stocks began.

Stock purchases by highly placed executives, such as chief executives and chief financial officers, has been a bullish metric in the past, suggesting a broad market rally was imminent. A wave of buying last November and early March each came right before more than a month’s worth of stock-market rallies.

But company executives have shifted from buying binges to selling splurges, suggesting insiders are questioning the recent three-month rally that has seen major indexes increase at least 30%. Insiders are collectively making a valuation call that their stocks have become too expensive compared to earnings expectations as the second quarter comes to an end, according to Ben Silverman, director of research at InsiderScore.com.

“Certainly within the insider community there’s some questioning of whether evaluations have peaked and whether this bull run is going to come to an end,” Silverman said.

Stocks experienced broad-based selling on Monday as the Dow Jones Industrial Average was recently down 169 points at 8371, adding to last week’s 3% drop.

With less than two weeks left in the quarter, Silverman said insider activity should start slowing down as companies generally close trading windows approximately a week before the quarter ends.

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This article is even more interesting. You can actually beat Warren Buffett at his own game. How? Well, some of his stock picks are now much much cheaper than at the time when Buffett bought them. He is still holding onto them, indicating that he still likes them. His views echoed his belief in his picks. He does not seem to be cutting any of his positions anytime soon. You can buy Conoco Phillips at HALF the price Buffett paid for.

You can buy Johnson & Johnson at $55 or 12% lower than Buffett's entry price of $65. How about US Bancorp, which Buffett paid $31, you can buy today and boast over lunch that you got in some 45% cheaper. ... And get this, Buffett is still adding to the positions mentioned above even as we speak... that means they are still good.

Of course I jest, Buffett is never a market timer, he could not care less whether he bought at the low or near the lows. All he is concerned is that he bought at value, and he knows that it will be worth a lot more sometime into the future.

By Matt Phillips (WSJ)

Bloomberg

Can you beat Warren Buffett at his own game? Despite the recent equities rally, some of Buffett’s favorite issues look pretty affordable at the moment:

Mr. Buffett liked oil giant ConocoPhillips (COP) enough to invest $7 billion in the stock through the end of last year, at an average price of $82.55, according to the Berkshire Hathaway annual report. Anyone buying today can get it for about $41.

Mr. Buffett has conceded an “unforced error” in buying this oil stock when oil prices were booming. But that doesn’t mean he has given up on it. In his last comments on the subject a few months ago, he reiterated his belief that demand for energy would remain strong. At current prices ConocoPhillips is about 13 times this year’s forecast earnings, but analysts predict that will drop to a cheap 7 times in 2010. That’s because they believe oil and gas prices will rebound.

He bought Johnson & Johnson at about $62 a share: It’s now about $55, or 12 times likely earnings, yielding 3.5%. He had also invested about $4.3 billion in food company Kraft, at around $33 a share. It’s now around $25, 13 times likely earnings and boosting a hefty 4.7% yield. He had also invested $2.3 billion in US Bancorp at an average price of about $31. Today’s it’s $17. (Mr. Buffett has added to his positions in both Johnson & Johnson and U.S. Bancorp since.)

p/s photos: Kama