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Does Warren Buffett own the next Tesla?



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  • 1. Does Warren Buffett own the next Tesla? March 2, 2014 BYD Company Limited Ticker: 1211:HK
  • 2. Disclosure! Longboard  Asset  Management,  LLC  (“Longboard”)  is  an  investment  advisor  to  funds  that  are  in  the  business  of  buying  and  selling  securi>es   and  other  financial  instruments.       Longboard  currently  has  a  long  posi>on  in  BYD  Company  Limited  (“BYD”)  common  stock.  We  do  not  own  any  op>ons  on  BYD  common   stock.     Longboard  will  profit  if  BYD  stock  increases  in  value  and  will  lose  money  if  it  decreases  in  value.  Longboard  may  change  its  views  about  or   investment  posi>on  in  BYD  at  any  >me  for  any  reason  or  for  no  reason.         Longboard  may  buy,  sell,  cover  or  otherwise  change  the  form  or  substance  of  its  BYD  investment.  Longboard  disclaims  any  obliga>on  to   no>fy  the  market  of  any  such  changes.       The  informa>on  and  opinions  expressed  in  this  presenta>on  (the  “Presenta>on”)  is  based  on  publicly  available  informa>on  about  BYD.   Longboard  recognizes  that  others  may  disagree  with  Longboard’s  analyses,  conclusions  and  opinions.       The  Presenta>on  includes  forward-­‐looking  statements,  es>mates,  projec>ons  and  opinions.  Such  statements,  es>mates,  projec>ons  and   opinions  may  prove  to  be  substan>ally  inaccurate  and  are  inherently  subject  to  significant  risks  and  uncertain>es  beyond  Longboard’s   control.       Although  Longboard  believes  the  Presenta>on  is  substan>ally  accurate  in  all  material  respects  and  does  not  omit  to  state  material  facts   necessary  to  make  the  statements  therein  not  misleading,  Longboard  makes  no  representa>on  or  warranty,  express  or  implied,  as  to  the   accuracy  or  completeness  of  the  Presenta>on  or  any  other  wriPen  or  oral  communica>on  it  makes  with  respect  to  BYD  and  Longboard   expressly  disclaims  any  liability  rela>ng  to  the  Presenta>on  or  such  communica>ons  (or  any  inaccuracies  or  omissions  therein).  Thus,   shareholders  and  others  should  conduct  their  own  independent  inves>ga>on  and  analysis  of  the  Presenta>on  and  of  BYD  and  other   companies  men>oned.       The  Presenta>on  is  not  investment  advice  or  a  recommenda>on  or  solicita>on  to  buy  or  sell  any  securi>es.  Except  where  otherwise   indicated,  the  Presenta>on  speaks  as  of  the  date  hereof,  and  Longboard  undertakes  no  obliga>on  to  correct,  update  or  revise  the   Presenta>on  or  to  otherwise  provide  any  addi>onal  materials.  Longboard  also  undertakes  no  commitment  to  take  or  refrain  from  taking   any  ac>on  with  respect  to  BYD  or  any  other  company.       As  used  herein,  except  to  the  extent  the  context  otherwise  requires,  Longboard  includes  its  affiliates  and  its  and  their  respec>ve  partners,   directors,  officers  and  employees.     For Investment Professional Use Only 2  
  • 3. Introduction!   §  In  this  presenta.on  we  outline  our   case  for  the  success  of  BYD   Company  Limited  and  how  the   current  zeitgeist  surrounding  Tesla   will  translate  into  a   higher  stock  price  for  BYD       §  BYD  is  an  under  told  and   undervalued  story  which  is  now   coming  to  light     §  The  large  valua.on  gap   between  BYD  and  Tesla  will  be   closed  with  a  upside   revalua.on  for  BYD  shares  as  their   story  becomes  more  mainstream  in   the  years  ahead     3  
  • 4. Is BYD going to $200?!   §    §    §    §  The  success  of  Tesla  has  kicked  off  a   global  zeitgeist     Tesla  and  BYD  are  the  Coke  and  Pepsi   of  the  global  transporta.on  and  energy   revolu.on   BYD  Company  Limited   200   175   ? 150   BYD  is  an  under  told  and  undervalued   story  which  is  now  coming  to  light   The  large  valua.on  gap   between  Tesla  and  BYD  will  be  closed   with  a  upside  revalua.on   for  BYD  as  their  story  becomes   mainstream  in  2014   125   100   75   50   25   0   Jul-­‐07   Oct-­‐07   Jan-­‐08   Apr-­‐08   Jul-­‐08   Oct-­‐08   Jan-­‐09   Apr-­‐09   Jul-­‐09   Oct-­‐09   Jan-­‐10   Apr-­‐10   Jul-­‐10   Oct-­‐10   Jan-­‐11   Apr-­‐11   Jul-­‐11   Oct-­‐11   Jan-­‐12   Apr-­‐12   Jul-­‐12   Oct-­‐12   Jan-­‐13   Apr-­‐13   Jul-­‐13   Oct-­‐13   Jan-­‐14   Apr-­‐14   Jul-­‐14   Oct-­‐14   Jan-­‐15   Apr-­‐15   Jul-­‐15   Oct-­‐15     §  We  believe  BYD  will  trade  above  $100   within  18  months  and  $200  within  5   years     4  
  • 5. Who the #$&% is BYD?!     §    §    §    §    §      10%  owned  by  Warren   Buffet’s  Berkshire   Hathaway   World’s  largest   rechargeable  baUery   manufacturer   Fastest  growing  Chinese   auto  company   #1  electric  bus   manufacturer  in  the  world   #1  hybrid  and  pure  electric   car  manufacturer  in  China   5  
  • 6. Wang Chuanfu is China’s Elon Musk!   “He’s  a  combina.on  of   Henry  Ford,  Thomas   Edison  and  Bill  Gates”       -­‐  Charlie  Munger   Vice  Chairman,  Berkshire  Hathaway   Referencing  BYD  CEO  Wang   Chuanfu  (pictured  right)   6  
  • 7. BYD Long Term Integration Strategy!   3  key  energy   technologies:     §  Electric   Transporta.on   §  Energy  Storage   Systems  (ESS)     §  Renewable  Energy   Genera.on       7  
  • 8. Transportation : Plug In Hybrid! §  Top  selling  model  Qin       §  0-­‐62  MPH  in  5.9  seconds   §  177  miles  per  gallon   §  Top  speed  115  MPH   §  Global  Market   8  
  • 9. Transportation : BYD K9 Bus!   §  Pure  Electric  Bus     §  30  hours  of  drive  .me   between  charge  in  NYC   MTA  tests   §  Less  than  30%  of  the  cost  per  mile  to  diesel  bus   §  U.S.  version  assembled  in   California   §  Global  Market  Design     §  Coming  to  a  city  near  you…   9  
  • 10. Transportation : Pure Electric Vehicle!   §  Denza  (new  brand)     §  50/50  Partnership   between  Daimler  and   BYD     §  Designed  specifically  for   the  Chinese  consumer     §  Mercedes  B  Class  design   §  Mid  2014  launch     §  Tesla  in   China     10  
  • 11. Energy Storage Systems (ESS)!   §  Very  well  posi.oned  in   the  emerging  energy   storage  market     §  Unlike  Tesla  they  are   currently  producing  ESS   at  industrial  scale     §  ESS  represent   the  largest  completed   energy  storage  projects   on  the  planet     §  integra.on  and   proven  capacity  to  scale   produc.on   11  
  • 12. Energy Storage Systems : ! Market Opportunity!   §  Energy  storage  is  a  500+   Billion  dollar  market   opportunity     §  Posi.oned  as  a  global   leader  in  the  segment     §  BYD  is  very  far  ahead  of   firms  like  Tesla  who   want  to  enter  the   business        Energy  Storage  Market          Grid-­‐Scale  Energy  Storage  ($B)   $150     $120        $90        $60        $30            $0   $114      $30      2014                          2015                          2016                        2017   §  Lux  Research  -­‐   $114  B  by  2017     §  Piper  Jaffrey  -­‐   $600  B  market   over  10-­‐12   years   §  Boston   Consul>ng   Group  -­‐  $400  B   market    by  2020   §  EPRI/DOE  -­‐ annual  savings   of  $50  billion/ year  via  energy   storage   Plenty  of  market…  for  the  right  product  at   the  right  price   12  
  • 13. Investment Catalyst!   §  Tesla’s  success  story  has  put  electric  transport  on  the  global  center  stage     §  The  recent  announcement  of  the  Tesla  “Gigafactory”  has  added  the  “energy   play”  to  the  conversa.on  as  well  an  addi.onal  mul.  billion  dollar  premium  to   Tesla’s  valua.on   §  BYD  has  recently  been  an  undersold  story  aner  its  early  2008  success  with   Warren  Buffet  taking  a  10%  stake  in  the  company   §  The  current  valua.on  gap  between  Tesla  and  BYD  is  now  3-­‐1  in  favor   of  Tesla   §  We  believe  the  market  is  beginning  to  recognize  the  true  value  of  BYD  and   will  begin  to  price  in  a  similar  Tesla  growth  premium  to  BYD  shares       §  The  market  is  hungry  for  the  “next  Tesla”  and  BYD  is  well  posi.oned  to  ride   that  wave  on  a  number  of  fronts   §  We  see  the  market  filling  the  value  gap  with  an  upside  re-­‐pricing  of   BYD  shares  to    $100  within  the  next  18  months   13  
  • 14. About Longboard! An  alterna>ve  approach  to  naviga>ng  the   investment  ocean       Longboard  is  an  asset  management  firm   specializing  in  trend  following  strategies.  The   firm’s  principals  have  been  in  and   researching  trend  following  strategies  since  the   late  1990s.       We  manage  both  private  investment  funds  and   mutual  funds  applying  our  trend  following   investment  style.             “Trends  come  like  a  series  of  ocean   waves,  bringing  the  high  .de  when   things  are  good  and,  as  condi.ons   recede,  the  low  .de  appears.  These   trends  come  unexpectedly,   unpredictably,  and  they  have  to  be   weathered  with  temperance,  poise,  and   pa.ence-­‐  good  or  bad.”     Jesse  Livermore,  Reminiscences  of  a   Stock  Operator   14  
  • 15. Contact Us! To  learn  more  about  Longboard,  connect  with  us  at:      info@longboard-­‐                602.910.6961                  2355  East  Camelback  Road,  Suite  750              Phoenix,  Arizona  85016                        www.longboard-­‐                                           For  media  inquiries,  please  contact:                                          Courtney  Jardine                                        courtney@longboard-­‐                                        617.467.4139                                                                                         15