Warren Buffet makes 1 Billion USD off BYD investment

BYD Auto, Headline | Ash | July 31, 2009 at 4:19 pm

According to reports from Bloomberg and auto.sohu.com from earlier this morning, it appears that veteran investor Warren Buffet has made an incredible 1 billion dollar paper profit from his investment in BYD.

Trading on the Hong Kong floated stock has increased five fold since his 232 million USD investment in BYD late last year.

Bloomberg had this to say:

Warren Buffett’s Berkshire Hathaway Inc. earned a $1 billion paper profit from an investment it agreed to make in Chinese carmaker BYD Co. less than a year ago.

The automaker has jumped fivefold in Hong Kong trading since the deal was announced on Sept. 27, helped by Buffett’s investment and rising demand for fuel-efficient vehicles. Three days earlier Berkshire agreed to an investment in Goldman Sachs Group Inc. that has since generated a paper profit of about $2 billion.

“When Warren Buffett says the sun shines out of somebody’s backside, it’s worth paying attention,” said Guy Spier, principal at New York-based hedge fund Aquamarine Funds LLC, who owns Berkshire shares and has researched BYD. Buffett is “betting on the jockey in this case,” Spier said, referring to BYD’s Chief Executive Officer Wang Chuanfu.

Berkshire’s MidAmerican Energy Holdings Co. unit agreed to buy 225 million new shares of BYD for HK$8 apiece. That stock now has a market value of HK$9.37 billion ($1.21 billion), based on yesterday’s closing price. Buffett will pay HK$1.8 billion.

BYD said last night it completed the sale. Buffett didn’t respond to a request for comment.

The Shenzhen-based company aims to more than double vehicle sales this year to 400,000 helped by exports and new models, Wang said in March. 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.

China’s overall passenger-car sales rose 26 percent to 4.53 million.BYD plans to sell shares on the mainland to help fund the development of its auto business. The company intends to offer as many as 100 million yuan-denominated shares in Shenzhen, it said in a July 16 statement.In May, the automaker agreed to explore cooperation with Volkswagen AG in areas including hybrid cars and lithium-battery powered electric vehicles. The company will also work with Buffett’s MidAmerican on the development of rapid-charge batteries for storing power from wind and solar generation, MidAmerican Chairman David Sokol said in September.

Lehman’s BankruptcyGoldman Sachs turned to Buffett after the global credit crunch forced Lehman Brothers Holdings Inc. into bankruptcy. Berkshire agreed to buy $5 billion in preferred shares paying 10 percent interest and took options to buy $5 billion of shares at $115 apiece. Goldman closed at $162.42 in New York Stock Exchange composite trading yesterday.

The company is likely to hold onto the warrants until close to their 2013 expiration dates, Buffett said in a Fox Business Network interview on July 24.Buffett, ranked the world’s second-richest man behind Bill Gates by Forbes magazine, transformed Omaha, Nebraska-based Berkshire from a failing textile maker into an enterprise with businesses ranging from ice cream and underwear to corporate-jet operations.

His net worth was estimated at $37 billion by Forbes in March.

Picture is from Business Week Magazine

Ash

Ash came to China at 18 on a whim and never left. Some 10 years later he collected a degree and a family along the way and now focuses his time on watching the Chinese car industry develop. He has witnessed the market change from being minor backyard market in to the world's biggest and most important market for all car manufacturers. You can contact or connect with him via Linkedin by clicking the 'Website' link.