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TheStreet Open House

Buffett's Appetite for China Not Suppressed

NEW YORK (TheStreet) -- Warren Buffett's name has been tossed around with China quite a bit over the past few days. Although he has consistently sung the praises of the United States, this world-famous investor's investing habits are far from U.S.-centric. On the contrary, in recent years he has been spotted jet-setting around the globe on a hunt for his next big opportunity.

China, in particular, has been a popular destination. In 2009, Buffett spent HK$2 billion to purchase a 10% stake in the battery maker-turned-electric car manufacturer, BYD. Thanks to China's blossoming middle class and the wild initial success of models like the F3, BYD shares surged following his investment. For Buffett, this dramatic ascension translated into dollar signs. Less than a year after his purchase, media sources reported that it had earned Buffett USD$1 billion. BYD was shaping up to be yet another success story for the Berkshire Hathaway (BRK.A) chairman.

Buffett continues to be in the money with his Chinese electric car company. However, in recent years, the mood surrounding BYD has soured dramatically. With issues like declining sales, product delays and land disputes weighing heavily, the company's share price has stumbled along a steady downward path, since peaking around October 2009.

Although the downturn has been dramatic, the pain may not be over. This week, Bloomberg reported that BYD was taking an axe to its first-quarter profit forecasts, paring estimates by as much as 95%. The report notes that the growing Chinese presence of competing car manufacturers like General Motors (GM) is largely to blame for the company's weakened expectations.



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The first two rules in Buffett's book of investing wisdom are, 1. Don't lose money; and, 2. Don't forget rule 1. While he has yet to record a loss with BYD, the company faces steep hurdles on the road ahead. It will be interesting to see what's next for the Berkshire/BYD relationship.

At the same time that his Chinese car investment is struggling, Buffett is making another transportation-related bet in the nation. This time, he is hoping that the popularity of air travel takes off in this emerging growth engine.

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