$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….”

Are you getting our free Daily Update
"reveal" emails? If not,
just click here...


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.


Irregulars Quick Take Paid members get a quick summary of the stocks teased and our thoughts here. Join as a Stock Gumshoe Irregular today (already a member? Log in)

8
Share your thoughts...

avatar
6 Comment threads
2 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
8 Comment authors
dave_mLucky 13jimpjwasdg777 Recent comment authors

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Leonard
Guest
Leonard

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

Add a Topic
994
Add a Topic
1614
Wayne
Guest
Wayne

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

Add a Topic
108
Add a Topic
424
Add a Topic
77
sdg777
Member
👍8
sdg777

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.

Add a Topic
994
Add a Topic
2698
Add a Topic
994
pjwa
Member
👍85
pjwa

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.… Read more »

Add a Topic
108
Add a Topic
994
Lucky 13
Member
👍1
Lucky 13

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… Read more »

Add a Topic
3486
Add a Topic
994
dave_m
Member
👍19

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… Read more »

Add a Topic
1682
Add a Topic
1614