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Warren Buffett's Favorite Electric Vehicle Stock

By Matthew Frankel, CFP® and Jason Hall - Updated May 13, 2021 at 8:40AM

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Buffett isn't known for his tech investments, but here's one big exception.

Warren Buffett doesn't use Berkshire Hathaway's (BRK.A 1.66%) (BRK.B 1.71%) capital to invest in up-and-coming technologies often, so when he does, it is certainly worth a closer look. In the exciting, but crowded, electric vehicle space, Buffett invested in a Chinese electric vehicle company called BYD (BYDD.F 0.00%) several years ago, and still holds the multi-billion dollar position in Berkshire's portfolio today. In this Fool Live video clip, recorded on April 28, Fool.com contributors Jason Hall and Matt Frankel, CFP, and Chief Growth Officer Anand Chokkavelu discuss Buffett's favorite EV stock and why it attracted his attention.

Anand Chokkavelu: Matt's next one, you mentioned it, BYD, which is market capital of $70 billion, sales of $24 billion, selling at 3X sales since it's more mature, we'll call this the Chinese Buffett one. Matt, take it away.

Matt Frankel: Anand just gave away the most fun part of the discussion, the Buffett ties, but I'll get there in a second. This is the third Tesla of China that we're talking about. The first two were at 28 and 27 times sales respectively. This one's at three times sales. I'm a big value investor, I believe valuations matter, even in a space as crazy as the EV space is right now. BYD has been around for a long time. They weren't a car company at first. They were founded in 1995. They were originally a battery company. They were the first Chinese battery supplier for Motorola and Nokia when they were making the, remember the little flip phones and stuff like that. So they supplied batteries for things like that. Pivoted to vehicles in the early 2000s, now they have the best-selling EV model in China. They delivered 427,000 vehicles in 2020, about half of which were either battery electric vehicles or hybrids. They have a full range of EV models already on the market, including commercial vehicles. They also build monorail systems, which is a really cool product. They aim to have an ecosystem of just zero-emissions transportation for the entire world. They make buses, they make street sweepers, which are currently in use in China right now. They've been profitable for years, which is a word that you haven't heard much yet in this conversation. They've been profitable since 2008 selling cars. So I would actually call them more of like the General Motors or the Ford of China rather than the Tesla of China, just because of their track record, their profitability, their wide range of proven vehicles.

Chokkavelu: You just dropped it from 3X sales to 1.5X sales when you just branded them the GM of China, sorry about it. 

Frankel: Did I just devalue?

Jason Hall: Sell, sell, sell.

Frankel: As Anand mentioned, Warren Buffett invested in this company a long time ago. He paid, let me get the number right, he paid $232 million for 8.25% of the company back in 2008. That stake is worth more than $7 billion now. He wanted to by 25% of the company, but they wouldn't sell it to him. So big investment in Buffett's portfolio, very successful one. Charlie Munger, who's normally the voice of like, "Don't invest in that," has been very optimistic on the company. He called their CEO better than Thomas Edison at running a business.  So it's a really impressive company. That's the one that I would call the Tesla in China for right now.

Anand Chokkavelu, CFA owns shares of Berkshire Hathaway (B shares). Jason Hall owns shares of Ford. Matthew Frankel, CFP owns shares of Berkshire Hathaway (B shares) and General Motors. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Tesla. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short June 2021 $240 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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Stocks Mentioned

BYD Company Limited Stock Quote
BYD Company Limited
BYDD.F
$36.69 (0.00%) $0.00
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$452,697.25 (1.66%) $7,395.26
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$301.55 (1.71%) $5.08
Nokia Corporation Stock Quote
Nokia Corporation
NOK
$5.21 (0.00%) $0.00
Ford Motor Company Stock Quote
Ford Motor Company
F
$16.18 (2.21%) $0.35
General Motors Company Stock Quote
General Motors Company
GM
$39.48 (2.65%) $1.02
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$900.09 (4.67%) $40.20
Marcus & Millichap, Inc. Stock Quote
Marcus & Millichap, Inc.
MMI
$40.80 (2.00%) $0.80

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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