$7 a share: “Discover the Profit Power of This ‘Tesla Clone'”

What's being pitched by Alpha Investor Letter?

By Travis Johnson, Stock Gumshoe, November 8, 2016

Today we’ve got a pitch from Nicholas Vardy’s Alpha Investor Letter, and it is blissfully not about the election at all.

Let’s all just breathe a sign of relief, “ahhhhhhhhh.” Soon, one hopes, every day will be like this moment.

Here’s what caught my eye about this “personal invitation” from Nicholas Vardy:

“Discover the Profit Power of This ‘Tesla Clone’

“Shares of this $7-a-share company could rise 60% in the months ahead. The next leg up has already begun… up 7% since the August 29, 2016, earnings report.”

OK, that sounds interesting. I have never been able to convince myself to buy Tesla shares, given the always absurd valuation… but electric cars are certainly part of a growing market, maybe there’s a company otu there that’s actually making money at it? Let’s see what Vardy is really talking about…

“… there’s one small company – roughly half the size of TSLA – beating Elon Musk and his team at their own game.

“This ‘Tesla Clone’ is doing everything Tesla does – except it’s doing it faster, sooner and bigger than Tesla itself….

“Shares of this “Tesla Clone” are already eating TSLA for lunch – gaining five times more than Tesla over the past 12 months….

“Sales and profits are UP for the ‘Tesla Clone’. In 2015, sales jumped more than three times – from 20,000 to 62,000 electric vehicles. This year, it’s on pace to sell more than 150,000 plug-in vehicles… and could top 1 million cars sold by 2020….”

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And, well, that’s about it for our clues… but, thanks to the incredible power of the Mighty, Mighty Thinkolator, it’s enough. This is almost certainly the Chinese electric vehicle company BYD (1211 in Hong Kong, BYDDF or BYDDY OTC in the US — BYDDF is 1:1, BYDDY is the 1:2 ADR, both trade in similar volume)

BYD started life as a maker of lithium ion batteries for cell phones, and it’s been a pretty well documented company thanks to the charisma of its founder and the substantial investment that Berkshire Hathaway made into BYD about eight years ago. That was during the first frisson of modern electric car excitement (the first Tesla roadster also hit the road in 2008), and the stock soared for a little while — mostly, really, because of the novelty of Warren Buffett effectively endorsing a pretty small Chinese growth company… though it was Buffett’s colleague Charlie Munger who really advocated buying this particular stake and introduced Warren to BYD’s founder Wang Chuan-Fu. It was a cool story, it hit Fortune Magazine at the time, and it was hot stuff for a little while before falling back to earth early in 2010 and had a couple weak years (Charlie Munger stood by them, for whatever that’s worth).

More recently, BYD has been refreshingly boring. They have continued to sell cars, and have made inroads into electric buses and utility trucks, and they certainly sell more electric vehicles (and at much lower prices) than Tesla. They also sold a stake to Samsung Electronics last year, so Berkshire’s share of BYD has been reduced to about 8% (which makes it a very small position for Berkshire, worth roughly $1.5 billion… not enough to get any attention in Berkshire’s annual reports).

It’s not a small company, the market cap is about US$20 billion now, but it is profitable and has been growing both revenue and earnings over the past year — and the valuation does not look too bad, at least on the surface, with a trailing PE of about 25, a price/sales ratio of 1, and a 1% dividend.

I have not looked into the company’s financials in any detail, but the basics are pretty well-presented by the FT here. The webpage for their North American business is here if you’re interested. They continue to have a subsidiary, BYD Electronic, which makes components for cell phones and other small electronics.

If you’re looking for other articles about what BYD is up to, there’s a piece about their models and 2015 sales here, and a story about their last earnings report here (the report was in August, and the stock was up afterward for a little while, as teased… but it is now below where it was when they reported). Our friend David Mazor, who writes about Berkshire Hathaway and its subsidiaries, also has a special report on BYD here and has been particularly interested in their growing electric bus business.

And with that, I’ll leave you to your research — think BYD is worth a tumble? Prefer the glitz and glamor of Tesla? Think electric cars are blah, or that the big automakers will consume the little electric guys? let us know with a comment below.

P.S. I also noticed in the ad that Vardy is also still pitching his “Compounding Machine that’s Beaten Berkshire’s Returns” special report — that’s about a stock I own and have written about many times, Markel, we covered that teaser here if you’re curious. Enjoy!

Disclosures: I own shares of both Berkshire Hathaway and Markel among companies mentioned above. I do not own any other investments discussed, and will not trade in any covered stock for at least three days after publication per Stock Gumshoe’s trading rules.


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Leonard
Member
Leonard
November 8, 2016 4:33 pm

Thanks – Is BYD the company that is supplying Mercedes Battery needs / Daimler-Benz, that knocked out Tesla?

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jim
Guest
jim
August 24, 2017 10:51 pm

Well, even a fool such as I can stumble into something. That is this site and EGTYF. My brief search on this company has left me astounded. Looks to good to be real. These guys are garnering some major players. German auto makers, Australian markets distributor. Edgepower using them for control systems which sound very impressive. Approved by Hawaiian state which was followed by orders here. Weird claims from forums that are not really trying to sell anything claiming reduced power consumption bills by orders of magnitude, enough to pay for the equipment and installation in new housing builds. In addition, this is a Canadian company that might be less vulnerable to mega oil and US gov. meddling and predation. They are not as vulnerable as other vendors in that they are not locked into a single storage system but can easily accommodate any storage scheme.

I was unable to find and the physical plant, they may have moved from the address I gleaned from the web. That address shows a type of business strip mall that is not suited for any type of production. Big caveat.

Another plus for me is though this is a Canadian co. they have an OTC offering. Good as my account will not allow non US issues. I may as well load up on this, if I lose a thousand or 2 then I am still basically broke in terms of rich folks.

A couple of other OTCs I am looking at, that are not touted yet by the teasers is an Idaho Cobalt miner startup that are getting good test results ECSIF. And a startup lithium miner that is near the TSLA plant that also claims good preliminary results PEMIF. Hope these are positive contributions for you guys as EGTYF may turn out to be for me.

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Wayne
Member
Wayne
November 8, 2016 4:55 pm

I have a real problem investing in China, Russia, Brazil, Argentina, Mexico,
Colombia, and pretty much all the countries in South America. First China and Russia are doing their best to start a short, hot, war in the far east.
The South American countries are unstable and I know lots of friends who
have lost money in various firms there. Mexico is probably safe to invest
in mines, etc., but if Trump is the next President I don’t think they will con-
tinue as a place to invest in.

I think the best company you have mentioned is MEET

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sdg777
Member
sdg777
November 8, 2016 10:03 pm

BYD has a joint-venture with Daimler called Shenzhen BYD Daimler new technology co. that is developing electric vehicle in south of China under the brand Denza. They are currently launching a second vehicle expecting large sales due to exemption on car number plate taxes.
( can cost you up to 12.000$ in Shanghai just for a number plate…). It may attract more people to the electric world.
they are working on a third vehicle with extended range.

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pjwa
Irregular
pjwa
November 10, 2016 12:11 am

Not only do number plates cost a lot, but they are rationed by ballot; so folk can be waiting many months to expend egregiously on one.
China’s policy is to phase out combustion entirely over the next 12 years; this will happen on the production side, for sure.
So the electric car market in China will soar and BYD is premium placed to get a significant share, though there are about 80 companies now saying they are moving into this field.
And re. the first point, electric cars also jump the queue for plates.
Remote charging is also being tested.

( Just need a few more coal-fired power plants to make ’em all run – nuclear now surely? Ed)

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Lucky 13
Irregular
Lucky 13
January 30, 2018 9:45 pm

Got an Energy & Capital teaser email today from Chris DeHaemer (www.energyandcapital.com, Angel Publishing) talking up BYD. He only teased it though, saying he would release a report ‘later this week’ so it sounds like his reco has NOT YET been issued.

Here’s a snippet from his E&C teaser:
“I’ve found a $10 company that is the largest EV maker in the world, and you’ve probably never heard of it. It is profitable and has a 19% share in the Chinese market. It looks so good that Warren Buffett, a man who said he never invests outside the U.S., owns a large portion of this company. And, as I said, unlike its competitor Tesla, it actually makes money.

“But it’s not just cars. The company has sold 40,000 e-trucks so far and expects to sell about 400,000 in the next decade. It is also big with high-priced, high-margin e-buses and has sold more than any other company.

“Though the company sells 90% of its products in China, it is pushing overseas. It has an ad campaign by Leonardo DiCaprio and has hired the former design head from Audi. The company has plants in California, Toronto, and is building one in Morocco, with eyes on South America.”
==

A quick Google of the terms Leonardo China Electric Car gave up BYD. I’m putting it on my radar (mainly to see what kind of bump it gets once he releases it to his readers), but with the September run-up from $6 to $10.50 I’m thinking any near-term profit may be hard to come by.

-L13

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dave_m
Irregular
May 10, 2019 12:29 pm

Maybe they’re a good bet in the third world, but Albuquerque, New Mexico USA had to formally ditch BYD’s electric busses from their flagship Federally funded transit project (Albuquerque Rapid Transit or ART) due to poor construction, broken features, AND lower than promised battery performance. I was disappointed as I am personally a big electric vehicle proponent. I bought VW stock just because of a blurb about them adopting Tesla’s charge protocol, and their Pike’s Peak world record run… before I knew they were going all electric. It’s a pure speculation that A. They break the entry level price barrier faster than Tesla, B. That the world is ready to gobble them up at that price, and C. Their styling gets more attractive. That’s a lot of planetary motion to line up.

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