BYD COMPANY LTD ‘H’CNY1 (OTCMKTS:BYDDF) is a Chinese electric vehicle play that has been on a torrential tear. BYDDF is unquestionably most famous for counting Warren Buffett among its cap table as a significant investor. Every time the company is referenced in any way, it isn’t “BYD Co”. It’s “Buffett-backed BYD Co.” But, just because that’s true hardly makes it a bad thing.
The Buffett premium exists quite simply because Buffett is unquestionably the most consistently and summarily successful investor of modern times. If he or his team does deep-dive due diligence on a company and then chooses to add it to his holdings, it should be worn as a badge of honor. However, the big question is this: is that an overhyped fact that has distorted investor perception of this stock? We will explore that question in a moment. But first, let’s take a broad look at this stock and company.
BYD COMPANY LTD ‘H’CNY1 (OTCMKTS:BYDDF) promulgates itself as a company that specializes in IT, automobile and new energy.
According to company materials, “BYD is the largest supplier of rechargeable batteries in the globe, and has the largest market share for Nickel-cadmium batteries, handset Li-ion batteries, cell-phone chargers and keypads worldwide. It is the largest supplier of rechargeable batteries and it also has the second largest market share for cell-phone shells in the globe. BYD Auto becomes the most innovative independent national auto brand and leads the field of electric vehicles with unique technologies. In the field of new energy, BYD has developed green products such as solar farm, battery energy storage station, electric vehicle, and LED, etc. It will continue to lead the new energy revolution in the world!”
In more basic terms, through its subsidiaries, BYD manufactures and sells automobiles. The Company also researches, develops, manufactures and sells batteries, which are applied on mobile phones, cordless phones, power tools and other kinds of portable electronic devices.
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Here is the remarkable problem the market has with this stock, and why it really all does come down to the fact that Warren Buffett invested: The company has some wacky financial statistics and a very strange way of conveying them.
First off, on the company’s main corporate website, they proudly list “financial highlights” from 2005 through 2010. And this is clearly a very recently updated website. There is no mention of anything past 2010. We also couldn’t find any obvious filings anywhere. We did find some updated stats, but they convey an almost astonishing load of debt on the books. It’s twice the market cap of the company, and six times the cash.
But, here’s the thing: If it was announced tomorrow that the whole story about Warren Buffett being an investor was some type of hoax, because of the seemingly concerning level of transparency and the high debt load, we would likely see this stock take a major hit. However, by all accounts, that story is not a hoax. And guess who’s better than you or me at evaluating the odds of victory for a gambit like this company has taken with its financial reputation and balance sheet? Here’s a hint: the initials are W. B.
Hence, as sentiment around the electric vehicle market and around Chinese speculation in equities goes, so goes BYDDF. And right now, that goes a long way.
Traders will note 70% during the past month in terms of shareholder gains in the name. Market participants may want to pay attention to this stock. BYDDF has a track record that includes a number of dramatic bounces. Furthermore, the name has seen a growing influx of trading interest, with the stock’s recent average trading volume running greater than 390% above its longer run average levels.
Earning a current market cap value of $9.1B, BYDDF has a significant war chest ($10B) of cash on the books, which compares with about $59.93B in total current liabilities. One should also note that debt has been growing over recent quarters. BYDDF is pulling in trailing 12-month revenues of $119B. This is an exciting story, and we look forward to a follow-up chapter as events transpire. Sign-up for continuing coverage on shares of $BYDDF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $BYDDF, either long or short, and we have not been compensated for this article.