market folly

Well, as the markets suffered a loss of nearly 7% yesterday, you might have missed this piece of information that seemingly slipped under the radar. Warren Buffett has acquired a 9.89% stake in BYD Company, a Chinese battery manufacturer. This battery company plans to sell electric cars by 2010 in the US. Buffett bought the stake through his Berkshire Hathaway holding MidAmerican Energy Holdings (Berkshire owns 87% of MidAmerican) and the stake cost around $230 million.

Purchasing a stake in a battery maker makes a great deal of sense here, given the squeeze in the automotive industry. Numerous manufacturers have already produced hybrids or electric cars and one can assume that the trend will continue, as consumers worry about miles per gallon and rising fuel costs. The automotive landscape is changing and Buffett looks to capitalize on the upcoming trend/shift in the industry. BYD makes lithium-ion batteries that will be found in electric vehicles. So, while this may be the worst year for hedge funds in a long time, Buffett is sticking to business as usual.



Source: NYT