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Will Warren Buffett Save The Sinking BYD Co.?

A 94% YoY decline for the first half of 2012 in the earnings of BYD Company Limited (BYDDY.PK), a Chinese manufacturer of electric automobiles, mobile phone batteries and solar panels, came as a shock to investors. The company became renowned worldwide after Warren Buffett bought almost 10% of the company’s stock back in 2008 for $230 million. The company’s stock has lost almost half its price since the earnings release on August 28 this year. The fall in the stock has also been criticized by Buffett’s followers, who think that Buffett should have anticipated the decline well before the earnings release.

Buffett’s investment multiplied to $1.2 billion in 2010, but since then, it has been falling, and is now worth only $416 million. Buffett can make a gain of 80% on his initial investment if he decides to sell his holding. However, this is the last thing that BYD will want.

The target price for the stock has already been slashed by 97% of the current price to 41 cents (in Hong Kong Dollars) by CLSA, a Hong Kong investment company. CLSA believes that:

“The company is likely to deteriorate further due to declining business in mobile phone components, rechargeable batteries, and new energy.”

BYD Highlights First Half 2012

The company makes its revenues in the following manner:
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