Automaker Stocks: Warren Buffett Takes on Ford, GM

(By Rebecca Lipman)

Did Warren Buffett drop the ball when Berkshire Hathaway bought into 10% ownership of Chinese automaker BYD back in 2009? Shares are down 77% in the last year and 82% in almost 2 years. The drop has left many Buffett imitators feeling more than a bit disgruntled.

According to¬†CNBC, the company’s 85% plunge in profits the first half of the year is largely attributed to car sales in China dropping 23% between January and June. Undeterred, the Chinese electric car maker has opened its US headquarters in Los Angeles on Wednesday to the interest and scepticism of many.

BYD plans to release a limited fleet of electric cars in the United States in the first quarter of next year, but is already behind schedule. CNBC reports BYD has yet to line up a dealer network and is late to bring cars to the US.

“The fact is, cracking the US market for any foreign automaker, not just the Chinese, isn’t easy. Sure, BYD will eventually have a smattering of dealers around the country ready to sell cars imported from China, but the numbers will be low and the scrutiny will be high. There’s already plenty of sceptics who doubt the Chinese can build a car that will have the reliability, styling, and safety features to succeed in the US.”

So, do you think BYD will succeed in America? And will Warren Buffett’s investment ever pay off?

If you’re interested in following the auto trend, here’s a list of the auto companies BYD will be competing against:

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1. Toyota Motor Corp. (TM): Market cap of $115.32B. Engages in the design, manufacture, assembly, and sale of passenger cars, minivans, and commercial vehicles. Share price as of 10/26 at $66.89. Relatively low correlation to the market (beta = 0.66), which may be appealing to risk averse investors. The stock has lost 5.67% over the last year.

2. Honda Motor Co., Ltd. (HMC): Market cap of $55.57B. Engages in the development, manufacture, and distribution of motorcycles, automobiles, and power products primarily in North America, Europe, and Asia. Share price as of 10/26 at $30.68. The stock has lost 15.2% over the last year.

3. Ford Motor Co. (F): Market cap of $45.10B. Develops, manufactures, distributes, and services vehicles and parts worldwide. Share price as of 10/26 at $11.87. This is a risky stock that is significantly more volatile than the overall market (beta = 2.4). The stock has recently rebounded, and is currently trading 7.1% above its SMA20 and 11.22% above its SMA50. However, the stock still trades -12.79% below its SMA200. The stock has had a good month, gaining 17.29%.

4. General Motors Company (GM): Market cap of $39.03B. Operates as a global automaker. Share price as of 10/26 at $24.99. The stock has recently rebounded, and is currently trading 10.59% above its SMA20 and 10.92% above its SMA50. However, the stock still trades -15.11% below its SMA200. The stock has had a couple of great days, gaining 8.23% over the last week.

5. Nissan Motor Co., Ltd. (NSANY): Market cap of $37.35B. Engages in the manufacture and sale of automotive products, industrial machinery, and marine equipment primarily in Japan, North America, and Europe. Share price as of 10/26 at $18.32. Offers a good dividend, and appears to have good liquidity to back it up–dividend yield at 3.28%, current ratio at 1.49, and quick ratio at 1.25. The stock is a short squeeze candidate, with a short float at (equivalent to days of average volume). The stock has had a good month, gaining 10.69%.

6. Tata Motors Ltd. (TTM): Market cap of $10.81B. Engages in the manufacture and sale of commercial and passenger vehicles primarily in India. Share price as of 10/26 at $18.95. This is a risky stock that is significantly more volatile than the overall market (beta = 2.17). The stock has recently rebounded, and is currently trading 9.96% above its SMA20 and 14.66% above its SMA50. However, the stock still trades -15.03% below its SMA200. The stock has had a good month, gaining 18.51%.

7. Tesla Motors, Inc. (TSLA): Market cap of $2.91B. Designs, develops, manufactures, and sells electric vehicles and advanced electric vehicle powertrain components. Share price as of 10/26 at $27.98. The stock is a short squeeze candidate, with a short float at 39.18% (equivalent to 21.4 days of average volume). The stock has gained 33.24% over the last year.

Interactive Chart: Press Play to see how analyst ratings have changed for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


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