BYD May Be Taking Cues From Buffett

The Chinese automaker's decision to delay mass production of its electric cars has the earmarks of Buffett's conservative investment strategy.
Publish date:



) -- Is


taking a page out of

Warren Buffett's


In moving away from its bold goal of mass producing an electric vehicle in China this year, BYD appears to reflect a similar conservative shift Buffett has recently been noted for.

Buffett, who in the past has been known for picking out undervalued stocks with massive upside potential, has recently made it clear that he is transitioning towards a more conservative investment strategy.

According to

Berkshire Hathaway's

(BRK.A) - Get Report

most recently quarterly 13-F filing, the financier has been placing the vast number of his largest bets on companies more known for stability rather than pop.

Some notable tweaks made to his legendary portfolio include large increases to his holdings of retail giant


(WMT) - Get Report


Republic Services Group

(RSG) - Get Report

, a trash company. In his annual letter to Berkshire shareholders, the financier also referenced his large cash position, saying that although it's earning 0% interest, he sleeps well at night.

Taking more conservative approaches to doing business will likely mean that returns for BYD and Berkshire Hathaway will be less dramatic than in the past. However, these transitions will also ensure that investors see consistent returns over the long term.

BYD, which stands for "Build Your Dreams," has taken the international and domestic auto industry by storm. Though the company's roots lay in the battery and power source producing industry, it has risen to become a symbol for the alternative and electric automobile revolution.

Since first making the bet in 2008, Warren Buffett's play on BYD has earned the investor billions. This week, Buffett and the rest of the company's shareholders were treated to a welcomed boost when the firm reported that strong car sales helped lift the company's fourth- quarter net profit 500%.

Though BYD has largely been focused on satisfying China's automobile demand, investors and car enthusiasts have long been buzzing over when the first BYD vehicles will hit American soil. Though there remains a strong chance that we will see the company's cars on U.S. roads in the near future, the trendsetting firm appears to have extinguished plans to mass produce its electric cars in China this year.

In a press release issued this week by BYD, the company outlined a far less dramatic plan for its electric vehicle going forward. Rather than producing the E6 on a grand scale, the company will instead produce 100 models to be used as taxis in Shenzhen, the company's home city. Further development is expected to be dependant on the success of this program.

In abandoning its plans for a mass produced electric car in China, the company will likely have to lean on other methods of turning profit. Expect BYD to focus more heavily on its F3 model. While not as revolutionary as a fully electric automobile, this sedan has risen to become one of the most popular cars in China.

Electric cars will be a growing part of the automobile market, and with models like the E6, BYD is likely to be a frontrunner when the trend takes off. Until then, the company can ensure that it will continue to provide investors with strong, stable returns by focusing on more tried and true methods of making money in the present.

Now that BYD has abandoned its bold plan to mass produce an electric car in 2010, does this company still have the same appeal? Feel free to leave a comment below.

-- Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion did not have a position in any of the stocks mentioned.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.