Warren Buffett's 3 Favorite Books: A guide to The Intelligent Investor, Security Analysis, and The Wealth of Nations



Latest Buffett Headlines

Loading...

Tuesday, August 31, 2010

Warren Buffett plots bid for RBS's Direct Line division

By James Thompson

Monday, 30 August 2010

Warren Buffett, "the Sage of Omaha" who turns 80 today, is one of the bidders seeking to buy Royal Bank of Scotland's Direct Line insurance business at a knock-down price. The European Union is forcing RBS, the state-controlled bank, to sell the division as punishment for taking public money during the financial crisis.

RBS held a beauty parade last week for advisers keen to run the sale of Direct Line. Mr Buffett's investment vehicle, Berkshire Hathaway, and the US insurer Allstate are among the potential bidders that are interested in RBS's insurance unit.

Stephen Hester, the chief executive of RBS, said earlier this year that floating Direct Line was "still the preferred option". But its deteriorating performance means a sale is now more likely.

The EU has given RBS a deadline of the end of 2012 to offload Direct Line.

The division, which includes the Churchill brand, has been hit by the rapid growth of no-win, no-fee legal firms that have led to soaring injury claims for road-traffic accidents. The value of claims paid out by Direct Line rocketed by 36 per cent to £2.1bn in the first half of this year, which led to an annual loss of £231m.

Direct Line at the division is now likely to be sold for substantially less than the £4.5bn offer submitted by the private-equity firm CVC in 2009. Sir Fred Goodwin, the former chief executive of RBS, is reported to have wanted £9bn for Direct Line and would not consider bids for less than £6bn. CVC, Berkshire Hathaway and Allstate were all involved in the


Share Investor Links

Share Investor Blog - Stockmarket & Business commentary
Discuss this topic @ Share Investor Forum - Register free


Download the SECs "Plain English Handbook"
Download the 1977 - 2009 Warren Buffett Letter's to Berkshire Hathaway Shareholders

From Amazon

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition
The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
Buy new: $26.14 / Used from: $21.54
Usually ships in 24 hours






Bookmark and Share

Friday, August 27, 2010

CNBC: Charlie Munger's Wesco Soars on Buyout Offer by Warren Buffett's Berkshire Hathaway

Published: Thursday, 26 Aug 2010 | 1:41 PM ET
By: Alex Crippen
Executive Producer

Charlie Munger in an April 2010 CNBC interview.

Shares of Charlie Munger's Wesco Financial spiked as much as 19 percent higher today (Thursday) to $387/share after Warren Buffett's Berkshire Hathaway revealed plans to buy the almost 20 percent of Wesco it doesn't already own.

Munger, Buffett's long-time friend and business partner, is Wesco's Chairman of the Board.

Wesco's independent directors and non-Berkshire shareholders still need to approve the transaction.

Wesco shares have settled back a bit from today's high, but is still up almost 13 percent at $366 as of 1:30p ET today.

Current price: [WSC 363.00 38.25 (+11.78%) ]

Berkshire is proposing to pay Wesco's book value per share at the time the deal closes. Dow Jones notes that at the end of the second quarter, book value was around $353 per share, but has probably changed since then. Even so, it appears Wesco's market price was well below its book value at the time of the offer, resulting in today's surge.

The stock is still well below its 52-week high of $416 on March, 10, 2010.

In a filing with the SEC, Berkshire says:

"Berkshire’s management determined (on August 25) to propose to Wesco a cash-stock election transaction in which it would acquire the remaining 19.9% of the shares of Wesco that it does not presently own in exchange for Berkshire Class B shares and/or cash valued at the book value per share of Wesco as of a time reasonably contemporaneous with the closing of such a transaction."

Berkshire has owned 5.6 million Wesco shares for over three decades. That represents 80.1 percent of Wesco's shares outstanding.

While Munger plays a terse and crusty sidekick role with Buffett at Berkshire's annual shareholder meetings, he's the star at Wesco's smaller annual meetings. Like Buffett, he writes an annual letter to shareholders about the company's performance.

Berkshire Portfolio

Munger has been very critical of the behavior of most Wall Street firms' behavior leading up to the 2008 financial crisis, telling our Becky Quick last year that "evil and folly" on the part of the banks and bankers have "helped create a catastrophe for everyone."

This year he had especially harsh words for Richard Fuld, the man at the top of Lehman Brothers when it collapsed. He did tell us, however, that he's been "favorably impressed" by Goldman Sachs chief Lloyd Blankfein, even as the firm faced SEC charges.

In February, Munger's Basically, It's Over parable about "how one nation (Basicland) came to financial ruin" criticized excessive "gambling" in the financial markets. By the end of the story, Basicland's credit is "reduced to tatters" and the fictional country is renamed Sorrowland.

Asked what happens when there's a fundamental disagreement with Charlie, Buffett told us during a live appearance on CNBC's Squawk Box in March:

"Well, what Charlie always says to me is he's--when we disagree--he says, 'Well, Warren,' he says, 'you'll see it my way because you're smart and I'm right.' That's his technique. But pretty much in--if we really disagree on something, we're not going to do it. But if I like something, he just grumbles and mumbles and, you know, says, 'That's kind of a dumb idea,' where I go ahead and do it."

Munger gets the credit for suggesting Berkshire's so-far extremely profitable investment in BYD, a Chinese electric car company.

Current Berkshire stock prices:

Class B: [BRK.B 76.37 --- UNCH (0) ]

Class A: [BRK.A 114433.0 --- UNCH (0) ]


Share Investor Links

Share Investor Blog - Stockmarket & Business commentary
Discuss this topic @ Share Investor Forum - Register free


Download the SECs "Plain English Handbook"
Download the 1977 - 2009 Warren Buffett Letter's to Berkshire Hathaway Shareholders

From Amazon

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition
The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
Buy new: $26.14 / Used from: $21.54
Usually ships in 24 hours






Bookmark and Share

CNN MONEY: Happy 80th birthday, Warren Buffett

(CNN) -- Warren Buffett has built a career based on contradictions.

During the greatest explosion of the global capital markets -- with more investors flipping stock in quick trades -- Buffett has amassed one of the world's largest fortunes by looking for bargains and holding onto them.

As chief executives are excoriated for wallet-bursting salaries, Buffett's salary as chairman of Berkshire Hathaway Inc. has been capped at $100,000 for years: His personal fortune is wholly dependent on the fortune of his company.

While the elite have flocked to cities such as New York, London and Hong Kong to build their fortunes, Buffett has accumulated his wealth from the backwater of Omaha, Nebraska, going home to a nondescript two-story home he lived in for decades before Warren Buffett became "Warren Buffett."

And, perhaps most interesting as Buffett celebrates his 80th birthday on Monday as one of the world's richest men, he emerged from the Financial Crisis not only with his reputation intact, but his image burnished: A capitalist hero wearing the white hat, while governments, politicians and companies struggle to regain their pre-crisis reputations in the public eye.

"He is globally respected because people are fascinated with the rich, but at the same time they would like to think it's possible to become rich without it gotten through immoral means -- that you have to cut corners, that you have to be ruthless," said Alice Schroeder, author of "The Snowball: Warren Buffett and the Business of Life."

"This is one man who raises the tantalizing possibility that that's not true, that you can become rich without compromise," Schroeder said. "He has an image of being an ethical paragon -- that's an ideal a lot of people would like to believe in."

His reputation was solidified in 2006 with his pledge to donate his wealth -- estimated this year at $47 billion -- to charity, and his efforts this year with Bill and Melinda Gates for the world's billionaires to donate half their fortunes.

"He certainly doesn't seem to fit the Rockefeller mode or model of the tycoon," said Laura Rittenhouse, author of "20 Buffett Bites: Delicious Morals for Turbulent Times." "It's less 'noblesse oblige' philanthropy but a sense of you can't take it with you, and you were damn lucky to have it in the first place -- you have to give it back.

"He is a capitalist who is not a materialist," Rittenhouse said.

Value investing

But before Buffett's pledge to give it all back, he built it up. The son of a businessman and four-term congressman, Buffett began investing while in high school and throughout college. But one of his largest influences was Benjamin Graham, an economist who taught him at Columbia University who was an early champion of value investing -- buying shares of companies that are underpriced.

The search for value helped propel Buffett's career and fortune through a wide diversity of industries with impeccable timing. "He studies the concept of 'buy low', 'sell high' as he would nuclear physics ... he will spend years thinking about every nuance and working at it from every angle," Schroeder said. "He's exquisitely aware of what 'buy low' means in a particular economic time and place, and has shifted in an anticipatory way from grungy industries to media and consumer markets at just the right time."

His sense of value investing has at times seemed counterintuitive. In 1988, he spent $1 billion for an 8 percent stake in the Coca-Cola Co., which at the time didn't seem much of a bargain. But as the company exploded with the opening of global markets, that stake is now worth $11 billion.

In the late 1990's, people perceived the "Oracle of Omaha" was missing the boat as he didn't buy into the explosion in technology companies. It turned out instead Berkshire Hathaway missed the dotcom Titanic -- as the S&P 500 lost 43 percent of its value from March 2000 to March 2003 in the wake of the dotcom implosion, the value of Berkshire investments increased 25 percent.

Perhaps the greatest measure of Buffett's investing acumen is the price of stock in his company. When he bought into Berkshire Hathaway in 1965 it was about $18 a share -- this week the price was hovering around $115,000 a share. Its annual return rate to investors since 1964 has averaged 20.3 percent, compared to the 9.3 percent return rate of the S&P.

Admission of mistakes

In 2004 shortly before her death, his wife, Susan, was asked what Warren Buffett's legacy would be. Her answer: His annual letters to stockholders.

Rittenhouse has made a study of Buffett's letters to stockholders. Her "Rittenhouse Rankings" charts a correlation between the candor of a CEO's annual letter to shareholders and the company's stock performance: The more candid assessment of the company in the letter, the better a company's stock performs.

Buffett's style in his letters is a blueprint for how he does business. "For one thing, Warren doesn't provide quarterly earnings guidance -- they truly invest in the long term, so he doesn't tell his investors you can expect to make XXX earnings," Rittenhouse said. "Life is messy, you could have lousy earnings, your insurance holdings may have to pay a great deal of claims -- there's a great deal of honesty in them."

That honesty in his missteps is one reason why Buffett makes fewer of them than others, said Joseph Hallinan, author of the book, "Why We Makes Mistakes," which was published in the UK as "Errornomics."

For Buffett, the need to be loved and feel love is behind this drive to succeed
--Alice Schroeder, author of "The Snowball"

"Overconfidence is the greatest cause of mistakes for executives ... there's a perception that they kill the weak, and if they show any lack of confidence they can be destroyed," Hallinan said. "The exception is two words: Warren Buffett. If you read his annual letters, he admits in very plain terms making some big mistakes. That's amazingly refreshing in the corporate world."

For example, Buffet's 1993 purchase of the Dexter Show Company for $433 million. In his letter to shareholders in 2008, he admitted "to date, Dexter is the worst deal that I've made." The mistake about the durability of the business was compounded by the fact it was purchased in Berkshire stock -- meaning, over time, the $433 million cost the company $3.5 billion as Berkshire's share price rose.

Acknowledging an error and analyzing why it was made is a cognitive exercise most executives prefer not to make. "He's very well calibrated in understanding what he knows and what he doesn't know ... he's optimistic, but not overconfident," Hallinan said.

Buffett's image as a virtuous tycoon is, in many ways, his own creation, Schroeder said. "Like many oversized, towering figures, he is driven by a tremendous drive and insecurity, otherwise he would be content to stay back at home," she said. "For Buffett, the need to be loved and feel love is behind this drive to succeed. When he was a child, he never felt love -- now he has 40,000 people coming to see him at the (Berkshire) annual meetings.

Many famous CEOs have the same dynamic, Schroeder says, yet they still come across as tyrannical. "Why is he so well liked and respected? He's been working at that for years -- he knew that if he was just rich, he'd be perceived as a robber baron."

Now Buffett has made his greatest investment, a $26 billion investment in the railroad Burlington Northern Santa Fe Corp., what Buffett has called his "all-in bet" on the U.S. economy. Will that pay off? Buffett is betting his track record that it will.

Share Investor Links

Share Investor Blog - Stockmarket & Business commentary
Discuss this topic @ Share Investor Forum - Register free


Download the SECs "Plain English Handbook"
Download the 1977 - 2009 Warren Buffett Letter's to Berkshire Hathaway Shareholders

From Amazon

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition
The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
Buy new: $26.14 / Used from: $21.54
Usually ships in 24 hours







Bookmark and Share

Tuesday, August 24, 2010

NEW YORK OBSERVER: Warren Buffett's May 1969 Retirement Letter: 'Documenting One's Boners'

August 25, 2010 | 2:08 p.m

In today's Observer, I wrote about the strange wave of hedge fund retirements. Between Stanley Druckenmiller's now-famous letter, Arthur Samberg's collapse, Steven A. Cohen's dour Vanity Fair interview, Paolo Pellegrini's failure and the retirement of Richard Grubman (the key-thrower, allegedly), it's been a strange summer.

But one important thing to keep in mind is that farewells from big investors don't always mean the end of the line.

In May 1969, when he was a 48-year-old millionaire, Warren Buffett wrote a heavy-hearted and sweetly apologetic letter to the members of his eponymous partnership, warning of his "intention to retire." He complained about the "seemingly barren investment world" and the "increasingly short-term oriented" speculative market. That environment, he said, had "generally become more negative and frustrating as time has passed."

He even sounded worried his age was catching up with him: "Maybe I am merely suffering from a lack of mental flexibility. (One observer commenting on security analysts over forty stated: 'They know too many things that are no longer true'.)" As the letter goes on, he gets more self-critical. "One final objective I would like very much to achieve (but which just isn't going to happen) is to go out with a bang. I hate to end with a poor year, but we are going to have one in 1969," he says. "I am not attuned to this market enviornment, and don't want to spoil a decent record by trying to play a game I don't understand just so I can out a hero."

He doesn't blame colleagues. "Documenting one's boners is unplesant business," he writes. "Our poor experience this year is 100% my fault."

A year later, he became chairman of the board of Berkshire Hathaway.

Share Investor Links

Share Investor Blog - Stockmarket & Business commentary
Discuss this topic @ Share Investor Forum - Register free

Warren Buffett's 1969 "Retirement Letter"

From Amazon

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition
The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
Buy new: $26.14 / Used from: $21.54
Usually ships in 24 hours







Bookmark and Share

REUTERS: Lou Simpson retiring from Berkshire's Geico unit

NEW YORK (Reuters) - Lou Simpson, who oversees investments at Geico Corp and was long considered a possible successor to Warren Buffett at Berkshire Hathaway Inc, is retiring at the end of the year, Berkshire said on Monday.

Simpson, 73, has worked for about 31 years at Geico, where he is president and chief executive of capital operations. He has worked under Buffett since Berkshire (BRKa.N)(BRKb.N) in 1996 bought what is now the third-largest U.S. auto insurer.

Buffett plans to take over Geico's $4 billion investment portfolio when Simpson retires. Berkshire ended June with $52.5 billion of equity investments, including at Geico.

"Lou Simpson is unique within Berkshire because he has been the only one other than Buffett with complete autonomy to make investment decisions," said Andy Kern, managing member of asset management firm Empirical Finance LLC in Dallas and author of the Buffett Ruminations blog.

The low-profile Simpson is "probably the most underappreciated member of the team among the general public because Buffett gets all the credit, and the blame, for Berkshire's stock holdings," Kern added.

The planned retirement of Simpson was reported earlier by the Chicago Tribune. Simpson works in that city.

In his February 2007 letter to shareholders, Buffett said Simpson had been his potential replacement to oversee Berkshire investments and would "fill in magnificently for a short period." But he said Simpson was just six years younger than he, so "a different answer" was needed for the long-term.

Two years earlier, Buffett called Simpson "a cinch to be inducted into the investment Hall of Fame," with average annual returns of 20.3 percent a year from 1980 to 2004, topping the Standard & Poor's 500's .SPX average 13.5 percent.

Buffett, Simpson and Geico Chief Executive Tony Nicely were not immediately available for comment.

Berkshire reports its equity investments and Geico's together, so it is not always possible to tell which investments are Buffett's and which are Simpson's.

Generally, Buffett makes larger investments, such as Coca-Cola Co (KO.N) and Wells Fargo & Co (WFC.N), although he told the Chicago newspaper that both men began investing in British food retailer Tesco Plc (TSCO.L) at the same time.

Buffett turns 80 next Monday. He has said that when he steps down from Berkshire, one person will succeed him as chief executive and one or more people will oversee its investments.

Vice Chairman Charlie Munger said last month that "it's a foregone conclusion" that Chinese investor Li Lu is likely to take over some investments, The Wall Street Journal said,

Buffett has transformed Berkshire since 1965 from a failing textile company into a $192 billion conglomerate with some 80 businesses and tens of billions of dollars of stocks.

In afternoon trading, Berkshire Class A shares were up $30 at $116,730, and Class B shares were up 10 cents at $77.83.

(Reporting by Jonathan Stempel; Editing by Lisa Von Ahn)

Share Investor Links

Share Investor Blog - Stockmarket & Business commentary
Discuss this topic @ Share Investor Forum - Register free


Download the SECs "Plain English Handbook"
Download the 1977 - 2009 Warren Buffett Letter's to Berkshire Hathaway Shareholders

From Amazon

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition
The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
Buy new: $26.14 / Used from: $21.54
Usually ships in 24 hours







Bookmark and Share

Monday, August 23, 2010

REUTERS: BYD warns of slower H2, says dealer pullouts overstated

HONG KONG/BEIJING | Mon Aug 23, 2010 4:45am EDT

HONG KONG/BEIJING (Reuters) - China's BYD Co Ltd (

1211.HK), backed by U.S. billionaire Warren Buffett, warned on Monday of a slowdown in car sales during the second half of the year and said it will launch new models to lessen the impact.

Sluggish sales in the past few months and high inventory have seen several dealers in Beijing and other areas pulling out of BYD's sales network, a setback for the high-flying carmaker, the China Business News reported on Monday.

BYD joins the ranks of its rivals in terms of expectations for a slowdown in the second half, largely as the result of Beijing applying the brakes to the economy's breakneck expansion in 2009.

The month of July saw the slowest growth for Chinese car sales in 15 months as the fading effects of Beijing's policy initiatives, the slower economy and widespread natural disasters kept buyers from showrooms.

But BYD Chairman Wang Changfu said the China Business News report was exaggerated, adding that dealer churn rates at the automobile firm were at normal levels.

"We have dealers joining and leaving the network all the time," he told reporters on Monday after BYD reported disappointing second-quarter results.

Shares of BYD, 10 percent owned by Buffett's Berkshire Hathaway (BRKa.N), were down 3.8 percent in Monday afternoon trade after BYD reported a lower-than-expected 2.6 percent rise in second-quarter net profit. The second-quarter profit was down substantially from the previous quarter.

China surpassed the United States last year to become the world's No. 1 auto market as sales took off, fueled by a raft of policy incentives from Beijing to boost consumption during the global economic slowdown.

That growth is expected to ease to more normal levels in the second half of the year.

Wang said BYD would focus on developing overseas markets and expand its production capacity of electric vehicles to meet market demand.

Starting next year, the company plans to export large quantities of its E6 electric car to the United States to compete with the likes of Nissan's (7201.T) Leaf and GM's GM.UL Volt.

BYD, which previously cut its 2010 sales target to 600,000 units from a previous target of 800,000, has prepared for a slowdown in China's auto market, Wang said. But he would not comment on how likely the company is to meet the new target.

"We will launch several new models later this year." he said. "The fourth quarter traditionally is a peak season and sales should pick up."

Among BYD's rivals, carmakers who have more aggressively pushed out new models or have a wider product portfolio, such as Chinese top automaker SAIC Motor Corp Ltd (600104.SS) and Dongfeng Motor Group Co (0489.HK), are set to hold up relatively well.

BYD aims to seek an A-share listing this year in Shenzhen, Wang said. The size of the fundraising will depend on the company's need and market conditions.

The company plans to issue up to 100 million A shares to fund its lithium-ion and solar battery production and the expansion of automobile products and accessories.

FLEEING DEALERS

A large number of BYD's departing dealers have recently left the Chinese automaker's sales network because high inventory tied up their cash, the China Business News reported on Monday.

The departures follow that of Ping Tong, BYD's flagship dealer in the southwestern city of Chengdu. Ping Tong, set up in June last year, sold 1,500 of BYD's F0 car that year, but its inventory for the model surged to as high as about 1,000 units a year later, locking up more than 35 million yuan ($5.15 million) as BYD continued to ship cars despite a market slowdown, it said.

"The growth of car sales in China will continue to slow down and the high inventory of BYD with dealers should take some time to digest," said Alfred Chan, chief dealer at Cheer Pearl Investment Ltd.

Fast expansion of BYD's sales network was also blamed for the closure of BYD dealers in Chengdu and other provinces, including Zhejiang, Shandong and Henan.

BYD has about 14 dealerships in Chengdu, while the best performer in the city, Shanghai Volkswagen, has 13. Shanghai Volkswagen is a car venture between Volkswagen AG (VOWG.DE) and SAIC Motor Corp Ltd.

"Because of high inventory levels, many dealers are competing to cut prices. We were forced to sell cars even at a loss," the China Business News quoted an unnamed BYD dealer as saying.

Normal inventory is equivalent to sales for 1- months, analysts said, while BYD's inventory could double that level.

($1=6.790 Yuan)

(Editing by Doug Young, Chris Lewis and Valerie Lee)

Share Investor Links

Share Investor Blog - Stockmarket & Business commentary
Discuss this topic @ Share Investor Forum - Register free


Download the SECs "Plain English Handbook"
Download the 1977 - 2009 Warren Buffett Letter's to Berkshire Hathaway Shareholders

From Amazon

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition
The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
Buy new: $26.14 / Used from: $21.54
Usually ships in 24 hours







Bookmark and Share

BLOOMBERG: Buffett-Backed BYD Shares Drop After Second Quarter Net Misses Estimates


Aug. 20 (Bloomberg) -- Jack Yeung, an analyst at BNP Paribas Securities Asia Ltd., talks about the outlook for BYD Co.'s financial results, and General Motors Co.'s filing for an initial public offering. GM’s filing with the U.S. Securities and Exchange Commission yesterday laid out the challenges the Detroit-based company will face generating enough investor demand to complete an offering that people familiar with the plan have said may be as large as $16 billion. Yeung, who speaks with Bloomberg's Rishaad Salamat in Hong Kong, also discusses China's auto industry. (Source: Bloomberg)

BYD Co., the Chinese automaker backed by Warren Buffett, fell as much as 3.9 percent in Hong Kong trading today, the lowest level in almost a year, after second-quarter profit was below analysts’ expectations.

BYD posted a second-quarter profit of 717 million yuan ($106 million), less than the 962 million-yuan average estimate of four analysts surveyed by Bloomberg. It’s the first time BYD, whose F3 car was the best-selling model in China in the first half, reported second-quarter results, and no year-earlier comparison was available.

The carmaker, 10 percent owned by Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc., cut its full-year vehicle sales target by 25 percent on Aug. 4 after China’s auto demand began slowing amid faster inflation and easing economic growth. BYD still plans to list shares in Shenzhen, China when the right market conditions are in place, Chairman Wang Chuanfu said in Hong Kong today.

“The company hopes to be able to list on the A-share market by the end of the year,” he said, adding that the timing of the listing will also depend on BYD’s liquidity requirements.

Shareholders will vote on the proposal to trade BYD in Shenzhen, where the company is based, at an Aug. 30 meeting.

BYD shares are down 35 percent this year, compared with a 4.6 percent drop in the in benchmark Hang Seng Index. The shares fell 3.6 percent to $44.70 in Hong Kong as of 2:35 p.m.

First Half

Net income for the first half more than doubled to 2.42 billion yuan, or 1.06 yuan a share, from 1.18 billion yuan, or 0.57 yuan, a year earlier, the company said in a statement to the Hong Kong stock exchange yesterday.

Sales rose 50 percent to 24.2 billion yuan for the six- month period, BYD said yesterday. The analysts’ second-quarter estimates were derived by subtracting first-quarter figures from the first-half earnings announced yesterday.

“The second quarter was a disappointment compared with our forecast because of slow F3 sales in June and automobiles like the G3 and L3 are not making up the loss in market share,,” said Scott Laprise, a Beijing-based analyst at CLSA Asia Pacific Markets.

‘Replacing the F3’

The carmaker’s performance this year will depend on the introduction of new cars and replacing the F3, said Laprise, who cut stock to an “underperform” on July 19.

BYD plans to roll out new models, such as the S6 sport- utility vehicle and L3 and I6 sedans, to improve sales during the remainder of this year, Wang said today.

“With them, we hope to gain a bigger market share and improve profitability,” he said.

Even with the new models, BYD now aims to sell 600,000 vehicles in 2010, down from its earlier goal of 800,000 vehicles. The company, which has announced plans to sell electric vehicles in the U.S. this year, met 36 percent of its original full-year sales target in the first six months of 2010.

The carmaker, founded by Wang, boosted deliveries to dealers 3.3 percent from a year earlier to 35,400 vehicles in June, lagging behind a 23 percent industrywide increase.

BYD may maintain promotions on its vehicles, depending on market demand, Wang said.

Domestic cars are losing in attractiveness to joint venture automakers as consumers become wealthier, said Jack Yeung, an analyst at BNP Paribas Securities Asia Ltd. before the earnings announcement. BYD is also cutting car prices to dealers, which will affect its margins, he said.

Second Half

“Profit will still see a significant increase in the first half year on year. What I worry about is the second half,” said Hong Kong-based Yeung, who forecast first-half profit of 2.715 billion yuan. People are switching from domestic carmakers including BYD to cars from foreign brands “because of the wealth effect. It’s a social status upgrade for them,” he said.

China’s car sales, which have risen every month since February 2009, started to grow at a slower pace in April. Passenger-car sales to dealerships increased 13.6 percent from a year earlier in July, the slowest pace since March 2009.

While BYD is considering entering the electrical home- appliance market, it hasn’t yet reached a decision, Wang said.

The company, which also makes batteries and assembles mobile phones, will enter the electrical appliances market starting with the production of television sets, China’s National Business Daily reported on its website on Aug. 11, citing an unidentified person.

--Liza Lin. With assistance from Nipa Piboontanasawat and Li Yanping. Editors: Kae Inoue, Ian Rowley.


Share Investor Links

Share Investor Blog - Stockmarket & Business commentary
Discuss this topic @ Share Investor Forum - Register free


Download the SECs "Plain English Handbook"
Download the 1977 - 2009 Warren Buffett Letter's to Berkshire Hathaway Shareholders

From Amazon

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition
The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
Buy new: $26.14 / Used from: $21.54
Usually ships in 24 hours





Bookmark and Share