Remember the famous line in Warren Buffet strategy in investing?
‘Never invest in a business you cannot understand’. This is the rule he has broken when Berkshire Hathaway purchased 10%, or worth $230 million, on a Chinese electric car company BYD. Details can be found here.
He told Fortune that the venture is really promising, based on the following grounds:
a. The company is an accomplished corporation in China, as it has 11 factories in China, India, Hungary and Romania employing some 130,000 people (mostly in China). BYD has also been supplying batteries for Motorola for many years.
b. Buffet has two close associate who have been watching BYD very closely in the past years. So, someone does understand the business and he can provide Buffet with whatever information he needed about this new venture.
c. The car produced by BYD is ahead of the game.
So, I guess, it is okay to break your own rules sometimes, if only it is supported by a strong case of intelligent decision making.
Originally published on luqyantamanni.wordpress.com, April 20, 2009: view original.
