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BYD – Electric bus and car maker

23rd July 20166th August 2016 globalstockpicking Leave a comment

Introduction

BYD’s stands for Build Your Dreams and its products are probably not that well known to you, at least if you live in a western country. But it is infact a huge company with 200 000 employees and a MCAP of 20bn USD, listed both in Mainland China and on the Hong Kong Stock Exchange. Even Warren Buffet is a believer in the company and has held 9% stake in the company since 2008. It is believed that the famous Chinese investor Li Lu brought the company to Warren’s attention. Since then BYD stock price has been through several rollercoaster rides, mostly fueled by hopes of future growth in Electric Vehicle sales. The last two years has been exciting, since BYD has managed to grab considerable market share in sales of electrical buses. How well they can compete on the electric car stage is yet to be decided. I often read comments like, check out the Chinese Tesla – BYD, but that is not entirely accurate. First off I quote BYD Motors President Stella Li: ““We are in a different market than Tesla,” Li says. “Tesla is for rich people. We are for normal people.” But more than that, BYD is also a company with a much broader business set. I also recommend this Bloomberg article for all you Tesla fans out there: Take that Tesla

Business segments

BYD has three reportable operating segments as follows:

Investments in EV value chain

29th February 201611th March 2016 globalstockpicking Leave a comment

Getting it right

If we buy the story that EVs are taking over (other theories are out there, like hydrogen powered cars), the question for us investors is, how do we play this to make money? If we focus on the electric cars for a moment. My reasoning so far has been that it will be very hard to know which car company comes out on top of this fight. Tesla seems to be in a good spot right now, but I wouldn’t count the German engineers at Audi and BMW beaten just yet, see for example what the Porsche team did with the 918 sports car. The Japanese have proven skillful as well. Another scary fact for the car companies is after-sale. I read somewhere that a regular petrol car contains about 30 000 parts, whereas a pure electric vehicle contains about 10 000 parts. And no liquids and fluids running around that need regular servicing. This probably means a lot less income for the car companies for service and repairs of the cars and that will be tough indeed.

So if we don’t know which car company will gain most market share, then perhaps we can dive deeper into the value chain and see if we can find other winners. Perhaps a battery maker that most of the car companies will use, or a Cathode supplier for batteries that is in a unique position, or a lithium mining producer in a great spot? My tactic will be to find that sweet spot or spots where the probability of success are highest, without knowing too much about the future, except that electric vehicles will gain in popularity.

Investment Theme: Electric Vehicles

28th February 201611th March 2016 globalstockpicking Leave a comment

Investment themes are important, because they can be drivers of returns for many years to come. An investment theme is about seeing something that is coming long-term and understanding the dynamics in such a way that you are able to profit from it. This is appealing because most investors on wall street does not have the same long term view that you as a private investor can have. Therefore something that will happen 4-5-6 years down the road, might not be priced into stock prices yet. This is a first of many post on an important investment theme in my portfolio.

Even before the launch of the Tesla Model S I have been intrigued by how electric vehicles will be a major game changer. With the success of Tesla I have dug much deeper into what this will mean for the future, and how to play this to make money. If I allow myself to dream a little bit, my vision in a not too distant future is self-driving electric cars, powered by cheap electricity or rooftop solar-panels. I was going to write a long post about how this will come about, relating to S-curves and such, but then I came across this excellent video by Bloomberg which sums it up nicely. Although they put a oil spin on the story, the basic message is the same, Electric Vehicles (EV), are coming to take over.