Christian DeHaemer is pushing an ad recently that focuses on a Tesla alternative, and his latest free email touted the appeal of buying it after this latest market shakeup. So what’s the story?
The ad is for his Bubble and Bust Report, which sounds like an entry-level monthly stock picking newsletter ($49/year, compared to his Crisis and Opportunity letter at $1,599/yr), and the big bait is that report about his “Tesla Killer: Best EV Company to Own Now” … so let’s sift through the clues, feed ’em to the Mighty, Mighty Thinkolator, and see what comes out the other end.
His basic argument is that his favorite electric vehicle (EV) company is profitable, while Tesla is a money-sucking capital-heavy Elon Musk ego project (my paraphrasing, not his words). Here’s what he notes in the introductory email:
“I want my EV company to make money and concentrate on producing and selling vehicles. There is one that perhaps you’ve never heard of. It is an expert battery maker and has produced more phone batteries than anyone in the world. It has also sold more electric vehicles than anyone, including more than 51,215 in December alone.
“And due to a new five-year plan in China, it is expected to grow 10 times by 2025.
If that’s not enough to entice you, then you should know that you can buy this company at a 13% discount.”
OK then… so what other clues do we get? After a rundown of some of the background stats that you’re probably already familiar with, the various long-range plans and regulatory goals of different countries that are pushing us toward rapid adoption of electric vehicles over the next 10-25 years (UK and France plan to ban gas vehicle sales by 2040, China wants 70% of cars to be hybrids or electrics by 2025, etc.), he gets into the specifics of the company he’s teasing…
“Around 20 years ago, a peasant farmer had nothing more than a dream. He knew that he could make something revolutionary, something that could literally change the world. In a beaten down farmhouse, he worked on inventing a new battery…
“Little did he know that this single invention would transform him from a small-town peasant in China into a verifiable billionaire….
“In 1995…. He started what would become the world’s BIGGEST mobile phone battery-maker. He made the lightest, most powerful battery on the planet….
“This man’s innovation in lithium-ion batteries is what now enables those devices to last for days on a single charge….
“… our inventor has gone from building the world’s most successful battery company to forming what will be the world’s most successful car company…”
So that’s probably enough clues for quite a few of you… and we’re also told about the record of profitability his company has shown over the past several years (in contrast to Tesla’s continuous loss-making reports).
And in case you need just a wee bit more in the way of clues, we get the biggie…
“Warren Buffett, the Oracle of Omaha — one of the greatest investors of all time — is even a major investor in this company!
“And he NEVER buys outside the U.S. But for this company, he did.”
Well that’s just silly — Buffett invests and buys outside the US and has for decades, and in fact has often talked about trying to locate more international investments. None of Berkshire’s publicly traded foreign investments are huge right now, with the exception of a good-sized position in Sanofi, but he has invested outside the US plenty of times, including owning a big chunk of the UK’s Tesco for a while, and has bought entire companies overseas as well (including a UK electric utility, a large Israeli metalworking company, and a german motorcycle accessories firm). You won’t see all of his publicly-traded foreign investments in Berkshire’s 13F filings, of course, since the SEC requires only that US-listed equity investments are included in those reports, but the foreign investments are still there — as are the foreign companies that are not counted as “investments” but are subsidiaries of Berkshire Hathaway.
But anyway, yes, most of Berkshire’s business is in the US, and most of their big investments are US-focused… and, yes, they did invest in this little battery maker back in 2009 — this is, of course, BYD (1211 in Hong Kong, BYDDF or BYDDY OTC in the US).
BYD got a huge amount of attention when Buffett bought about 10% of the company back in the Fall of 2008, in the midst of the financial crisis — though it was actually Charlie Munger, Buffett’s partner, who owned shares and brought BYD to Berkshire’s attention, mostly because of his admiration for BYD’s founder and CEO Wang Chuan-Fu, who Munger referred to as a combination of Jack Welch and Thomas Edison. It has certainly worked out well, that position has I think gotten slightly eroded by subsequent share sales, so I don’t think they own quite 10% anymore (more like 8%, I believe), but that $230 million investment is now worth something in the neighborhood of $1.3 billion. That doesn’t make it a particularly critical investment for Berkshire, and I haven’t heard Buffett talk about it much of late, but it has been both lauded and controversial from time to time over the years.
BYD has also come up a few time in the pages of Gumshoe, though not a lot recently — our friend David Mazor, who writes about Berkshire subsidiaries and investments, has been interested in them recently mostly because of the huge numbers of orders they’re getting for electric buses, and a few newsletters have touted the stock since Berkshire got on board (the most recent push I covered was from Nicholas Vardy about 18 months ago)… and it’s a common refrain among investing pundits that BYD is a “Tesla clone” that looks more appealing than Musk’s Tesla, mostly because BYD makes money and has that home field advantage in the Chinese market, where electrification of the automobile fleet (and pollution reduction) is a priority of the government.
BYD is more appealing to me than Tesla, though I’ve never owned either directly… and I’m fine with letting Warren Buffett manage my exposure to BYD at this point, though I can see the appeal of a battery and electric vehicle company that has been consistently profitable for a decade. The financials look fairly reasonable, though it is certainly not a consistent growth company — they had a big year in 2016, but the past four quarters have been pretty flat compared to the year-ago period… at least partially, it appears, because of changing subsidy policies for electric cars in China (and there have been more changes for 2018, with subsidies focusing on longer-range and more powerful electric vehicles — I don’t know whether that puts B