Is your stock portfolio not quite as well diversified as it once was? It happens. Investors tend to gradually add too much of what's popular without thinking much about it, only to wake up one day and realize they're long overdue for a rebalancing.
If you recognize this is where you are right now, why not consider a name most investors would never even think about, but one that most investors should? That's BYD Company (BYDDY -0.56%). Here's why it might be a smart addition to your holdings.
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What's BYD?
BYD is predominantly a manufacturer of affordable electric vehicles (EVs). Most of its EVs are sold in its home country of China (or at least in its neighboring nations). With the exception of North America, however, you can find a way of purchasing a new BYD-made electric vehicle pretty much anywhere in the world. The company sold 4.25 million cars last year, nearly 2.5 million of which were hybrids, while just a little less than 1.8 million were all-electric battery-powered automobiles. This translated into reported revenue of $108 billion, up 23% year over year. Of that, $5.6 billion was turned into net income. Not bad.
There are several reasons beyond its recent fiscal results, however, to step into a position in this underappreciated name.
Five reasons to buy BYD stock
This is by no means an exhaustive list of reasons to take on a stake in the electric vehicle outfit. These are the highlights, though.
1. BYD is winning the global EV war
Tesla (TSLA -1.12%) may be the world's best-known EV name. But it's technically not the biggest. That honor now belongs to BYD. And that's just on the battery-powered-vehicle front. Counting BYD's hybrids (which are proving to be increasingly more marketable than pure EVs), BYD is considerably bigger, with control of about one-fifth of the world's total EV market.
Bigger isn't always better, of course. However, bigger companies got that way for a reason.
2. BYD is well diversified
BYD's mix of hybrids and all-electric battery-powered vehicles provides the company with two key ways of driving revenue. The EV maker isn't just electric vehicles, however. It also manufactures buses, forklifts, high-speed commuter trains, utility-scale energy storage solutions, and perhaps most notably, lithium-based batteries used by other electric vehicle companies' cars. Specifically, BYD supplies Ford Motor Company, Toyota Motor, and even the aforementioned Tesla with batteries for their EVs.
And almost needless to say, BYD is blazing the trail in terms of EV battery refinement. The lithium iron phosphate batteries that Ford recently touted as part of the reason it would revolutionize lower-cost electric vehicle manufacturing in the U.S. have been in BYD's developmental wheelhouse for some time now.
In the meantime, BYD continues working on the same kind of solid-state lithium battery that QuantumScape (NYSE: QS) is, which promises even better EV performance and cost progress.
3. BYD is self-sufficient
This is relatively unique within the electric vehicle arena, too.
While major players like Ford, Tesla, Toyota, and General Motors could invest in the development of their own EV battery technology (and to some extent are), these companies typically choose to avoid this distraction and instead punt this work to a third party.
There's an obvious downside to doing so, though. Not only does this approach help fund a rival's own research and development (R&D), but it also leaves these automakers dependent on a supplier that prioritizes its own products.
BYD's self-sufficiency goes well beyond manufacturing its own electric vehicle batteries, however. It's nearly a fully vertically integrated outfit, meaning it makes almost everything its automobiles require for completion, including their electronics components. It even owns a fleet of transport ships, allowing it to deliver vehicles by the thousands to overseas markets without relying on third-party maritime shipping services.
Although more expensive up front, this self-sufficiency not only means more flexibility in the end, but in the long run, a better bottom line as well.
4. BYD is profitable
And yes, there is a bottom line. It's growing, too. Last year's net income of $5.6 billion was up 34% from 2023's figure of just under $4.2 billion. By operating in the black rather than in the red, BYD can invest and maneuver as necessary instead of worrying about maintaining a fiscal condition that -- if need be -- allows it to raise funds at a later date. Or, if the need ever arises, BYD will be able to borrow money at favorable rates.
Whatever the result, maintaining consistent profitability is an edge that plenty of other names in the EV and adjacent businesses just don't have.
5. There's plenty more growth in store for BYD
Finally (and perhaps most importantly), the worldwide EV market should continue to grow, lifting BYD's fortunes with it.
It might be a bit difficult to believe from where you sit. Americans' limited love affair with electric vehicles seems to have run its course, with the American Automobile Association -- which you know as AAA -- reporting the number of U.S. drivers even thinking about buying an EV still shrinking from 2022's peak of 25% to only 16% now.
That's mostly an American dynamic, though. Overseas, interest in electric vehicles continues to grow. An outlook from Roots Analysis suggests the global EV market is set to grow at an annualized pace of 25.3% through 2035. BYD's massive core market is expected to lead the charge, too. The International Energy Agency predicts that hybrids and battery-powered vehicles will account for 80% of China's new-car sales by 2030, up from only around half right now.
It's not an unknown name to everyone everywhere
Yes, it's a bit off the beaten path. That's the point. Most U.S. investors don't own many -- if any -- stocks of foreign companies. Even fewer own foreign stocks that don't do any business within the United States. Fewer still hold a name that isn't listed on a U.S. exchange; BYD shares are only listed over the counter.
Don't be dissuaded by any of these unusual details, though. There's a whole world of opportunity completely outside of the United States, and BYD is quietly one of the best.
This might help convince you: As off-the-radar as BYD may be, Warren Buffett's Berkshire Hathaway holds a $2.4 billion, 162-million-share stake in the Chinese EV maker. That alone speaks volumes in favor of this stock.
