Nowadays, he helps run Lingotto Innovation, a growth-focused strategy that similarly attempts to find massive stock market winners. In May, Anderson and co-manager Morgan Samet spoke to Barron’s. In this interview, they highlighted three stocks they’re very excited about over the next decade.

EVs

Let’s start with the most familiar, BYD (OTC:BYDD.F). This is the Chinese hybrid and electric vehicle (EV) maker that’s now outselling Tesla. Last year, BYD’s revenue grew 29%, toping $100bn for the first time ($107bn). Its affordable EVs are selling like hotcakes worldwide, and I’ve been seeing more of its cars on UK roads.

Anderson highlights BYD’s “deep commitment to science” as a competitive advantage. The firm designs and manufactures its own batteries. Indeed, as the world’s second-largest player, it sells EV batteries to others, generating a sizeable revenue stream beyond cars.

The stock’s up nearly 400% in five years, giving the business a chunky market-cap of $135bn. However, the forward price-to-earnings ratio of 17.5 looks reasonable, especially compared to Tesla’s 175.

Naturally, the global EV market’s extremely competitive, which adds risk. And the US and EU are likely to keep tariffs high to protect their own car industries from cheap Chinese imports. I’m less interested here.

Driverless trucks

To my mind, the next stock has a lot more explosive potential. This is Aurora Innovation (NASDAQ: AUR), a leading autonomous trucking company.

Uber-backed Aurora is working with industry heavyweights like Continental, Toyota, and Volvo Trucks. So it’s not trying to replace traditional trucking companies, but integrate its autonomous software/hardware systems into vehicles.

Now, the challenges here are obvious. “Trucks go faster, they carry heavier materials, there is more regulation, and companies operate across state lines“, Samet points out in the article. One motorway accident could be devastating for all involved, including Aurora shareholders.

However, the ability to operate driverless would deliver massive savings for the industry. In May, Aurora launched autonomous truck runs between Dallas and Houston, a route that has now surpassed 20,000 miles.

Priced at $5.70, the stock’s down 41% since going public in 2021.

AI diagnostics

The third stock’s Tempus AI (NASDAQ: TEM). The company uses artificial intelligence (AI) and a vast library of clinical data to help physicians make personalised treatment decisions for patients, particularly those with cancer.

The company does genomic sequencing tests, while its Tempus One tool functions as a generative AI clinical assistant. Over 50% of US oncologists are now connected to Tempus.

For me, this is the most interesting because it’s only slightly larger than Aurora with a $12.5bn market-cap, but is far more advanced commercially. While Aurora isn’t forecast to generate $1bn+ in revenue until 2029, Tempus is on course for $1.3bn this year.

The main risk is that Tempus is still loss-making. But it’s nearing profitability while growing strongly (20%+ revenue growth forecast till at least 2028).

Undoubtedly, these two last picks are high-risk, high-reward. For adventurous investors though, I think Tempus may be worth exploring further.

The post 3 stocks that could be huge market winners, says this ex-FTSE 100 fund manager appeared first on The Motley Fool UK.

A popular strategy

His approach has been copied by many others including Li Lu, who’s made the journey from a student leader during the 1989 Tiananmen Square protests to a successful investor. He’s been described as ‘Asia’s Warren Buffett’.

And there’s another similarity. Both indirectly own shares in BYD (OTC:BYDD.F), the Chinese electric vehicle (EV) maker. Berkshire Hathaway, Buffett’s investment vehicle, first took a stake in 2008. Although it started reducing its position in 2022, according to CNBC, it owned 4.4% of the company at 16 July 2024.

The firm which Lu founded, Himalaya Capital Management, is also believed to retain a stake in BYD. Indeed, it’s been reported that the Chinese billionaire was the person who convinced Charlie Munger to invest.

With two such prominent shareholders, I think it’s worth considering the pros and cons of buying BYD’s stock.

Taking a closer look

In 2024, it produced 3,523 more vehicles than Tesla. This means it’s now the world’s largest EV manufacturer. It also produces batteries and solar panels.

And despite its silly name (BYD’s short for ‘Build Your Dreams’), it certainly appears to be making good progress in Europe. I’ve started to see more of its vehicles on Britain’s roads and, I have to say, they look much more attractive than, for example, Tesla’s current range. However, it has a long way to go before it overtakes some of the more established manufacturers on the continent. But, unlike its American rival, at least sales are going in the right direction.

Also, the stock’s much more attractively priced than many of its peers. Its historic (trailing 12 months) price-to-earnings ratio’s less than 20. Tesla’s is well over 100. The differential is probably explained by the latter being viewed more as a tech company — with its emphasis on self-driving — rather than a traditional vehicle manufacturer. But I think this is a little unfair. BYD also offers autonomous driving capabilities — impressively named ‘God’s Eye’ — across its entire range.

However, despite these positive aspects, I don’t want to invest.

No thanks!

Some of my concerns relate to its home country. As a Chinese company, it’s a prime target for President Trump’s tariffs. That’s probably one of the reasons why it’s building a factory in Hungary and has another planned for Turkey. However, we’ve seen that it’s not just China that’s been targeted with higher import taxes.

Also, the Beijing government operates a different framework and has other priorities to most Western countries. In addition, BYD recently announced some significant price cuts of up to 34%. Inevitably, these will impact the group’s margin.

And I think it’s too easy to fall into the trap of basing the investment case on what’s happening at Tesla. At the moment, the Chinese group’s performing much better which means it’s tempting to buy. However, it still faces the same problems that are affecting its American rival, principally fierce competition and supply chain inflation.

For these reasons, BYD’s not for me.

The post ‘Asia’s Warren Buffett’ has a stake in BYD. Should I? appeared first on The Motley Fool UK.

Forward P/E ratios: a world apart

Tesla’s forward price-to-earnings (P/E) ratios remain stratospheric by any standard. The company is expected to trade at 168.8 times earnings in 2025, falling to 111.4 times in 2026 and 85.7 times in 2027. Even by its own five-year history, these multiples are elevated, and they are more than 10 times the consumer discretionary sector median.

BYD, by contrast, looks far more modest. Its forward P/E is 18.4 times for 2025 and 14.2 times for 2026. That’s just a fraction of Tesla’s and much closer to sector norms. This huge valuation gap reflects the market’s belief in Tesla’s future growth, but also means any disappointment could hit the shares hard.

Revenue multiples: premium vs practical

Tesla’s price-to-sales ratio for 2025 is a lofty 10.4 times, while BYD’s is just 0.65 times. In other words, investors are paying a huge premium for each dollar of Tesla’s sales, while BYD trades closer to traditional automaker multiples. BYD’s lower multiple reflects its mass-market positioning and focus on affordability, while Tesla’s premium signals expectations for high-margin growth and disruptive new business lines.

Net cash and capital structure

Tesla boasts a market cap over $1trn, with $37bn in cash and $13bn in debt. This gives it a strong net cash position and plenty of firepower for R&D and expansion. BYD, with a market cap around $147bn, holds $21bn in cash and $5.7bn in debt. Still solid, but on a smaller scale. Tesla’s financial muscle gives it flexibility, but BYD’s balance sheet is also robust and supports its rapid global expansion.

Autonomy and robotics

The real battleground is not just EVs, but autonomous driving and robotics. Tesla’s valuation is highly detached from automotive peers because investors are betting it will dominate self-driving technology and unlock new business models like robotaxis and AI-powered logistics. Its Dojo supercomputer and Full Self-Driving (FSD) efforts are central to this thesis, though regulatory hurdles remain.

BYD is not standing still. Its latest models integrate advanced driver-assist systems, LiDAR, and rapid-charging battery tech. This has already made headlines. However, its approach is more incremental, focusing on affordability, scale, and steady technological improvements. Coupled with the fact that it’s Chinese, it hasn’t been afforded the same attention by investors.

Verdict

BYD trades at far lower valuation multiples and has recently overtaken Tesla in global EV sales, especially in China and Europe. Meanwhile, Tesla commands a huge premium based on its potential to lead in autonomy and AI-driven transport. However, the execution risk is huge. For value-focused investors, BYD is the obvious choice, but clearly the market favours Tesla and Elon Musk’s ambitions.

The post Does BYD or Tesla stock offer the best value? appeared first on The Motley Fool UK.

Looking at that portfolio today, it’s interesting to see that Buffett has a very large position in an electric vehicle (EV) company. It’s not Tesla. And it’s not NIO. Instead, it’s BYD (OTC:BYDD.F), an under-the-radar Chinese EV maker that has a listing in the US.

Should I follow him and buy BYD stock for my portfolio? Let’s take a look.

BYD: the business

Founded in 1995, BYD is an automotive company that offers a broad range of internal combustion, hybrid, and battery-electric passenger vehicles. It also offers commercial vehicles such as trucks, vans, and buses. When it was founded back in the 1990s, it was originally focused on batteries. However, in 2003, it entered the automotive market.

Last year, it sold around 190,000 new-energy vehicles. That’s not as many as Tesla sold (around 500,000). However, it’s far more than Chinese rival NIO sold (around 44,000).

It’s worth pointing out that Buffett has been invested in BYD for a long time. He first invested here back in 2008 on advice from his business partner Charlie Munger. This long-term approach has paid off. His original investment of around $230m in BYD is now worth over $9bn.

Could it be the Tesla of China?

BYD appears to be having a lot of success right now.

In October, three of its models were among China’s five best-selling new-energy vehicles, according to Bloomberg. These were the Qin Plus DM-i, the Song DM, and the Qin Plus EV. The other two EVs that made the top five were the SAIC-GM Hongguang Mini EV and Tesla’s Model Y.

Meanwhile, for the first three quarters of 2021, four BYD models were among the 15 best-selling new-energy vehicles in China (listed below), according to the China Passenger Association.

As for growth, BYD is putting up some impressive numbers at present.

In October, its new-energy vehicle sales were up 263% year on year to 80,003 units. By contrast, NIO saw a 27.5% dip in deliveries in October due to supply chain challenges.

Meanwhile, in the third quarter of 2021, its battery-electric sales jumped 67% and outpaced Tesla’s sales for the first time since the end of 2019, according to the China Automotive Technology and Research Center.

Should I buy BYD stock?

There’s certainly a lot to like about BYD, in my view.

For starters, revenue growth has been very strong in recent years. Between 2015 and 2020, revenue jumped nearly 100%. This year, analysts expect top-line growth of nearly 40%.

Secondly, unlike many other EV makers, BYD is already profitable. This reduces risk.

One concern I have right now, however, is the valuation. BYD shares have had an amazing run over the last two years (+800%) and as a result, the stock now has a market cap of around $130bn and a forward-looking P/E ratio of around 200. These are high figures. 

Another issue for me is the low return on capital. Over the last five years, it has delivered an average return on capital of just 6.3%. I prefer to invest in highly profitable companies that earn a big return on their investments.

Given these issues, I’m going to leave this Buffett stock on my watchlist for now.

All things considered, I think there are better stocks to buy.

The post Warren Buffett owns this EV stock. Should I buy it too? appeared first on The Motley Fool UK.