Key Points

Warren Buffett is arguably the greatest investor of all time. But even Buffett will acknowledge that he's made his fair share of investing mistakes throughout his career. There are countless ways to follow Buffett's genius by sifting through Berkshire Hathaway's portfolio. 10 stocks we like better than BYD Company ›

Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) CEO and Chairman Warren Buffett needs no introduction. Buffett has been generating market-beating returns for Berkshire's shareholders for about six decades now. Sadly, at the end of the year, Buffett, who is 94 years old, will step down as Berkshire's chief and hand the reins to his vice chairman of non-insurance operations, Greg Abel. Buffett will remain chairman of the board of directors.

While Buffett is still likely to stay involved in some capacity, he'll likely be less involved in stock picking. So if you want to invest like Buffett, there's still some time to take a page out of the Oracle of Omaha's playbook. And there is always time to learn from Buffett's mistakes.

Here's one Buffett stock to buy hand over fist and one to avoid.

BYD: The EV company outperforming Tesla and its stock is worth consideration

Buffett and his team of stock pickers got plenty of credit for their successful purchases of iconic stocks like Apple, Bank of America, and Coca-Cola. But in my opinion, Buffett does not get enough credit for Berkshire's purchase of stock from the Chinese electric vehicle (EV) company BYD(OTC: BYDDY). Buffett is old, but he never fails to adapt to new trends in the market. In 2008, he foresaw the move to electric vehicles and guided Berkshire to purchase about $230 million of BYD's stock. Today, his investment is worth between $6 billion and $8 billion, according to multiple media outlets, meaning Berkshire has made many multiples on its initial investment in the company.Image source: The Motley Fool.

While American EV maker Tesla has been in the spotlight for a while, many in the U.S. may have only recently discovered BYD because its cars aren't sold here. But lately, BYD has outperformed Tesla. The company now controls over 30% of the EV market in China. BYD appears to have done this simply by creating better products. BYD is selling cheaper models than Tesla that can charge longer ranges in a shorter time. In 2024, BYD, which also makes hybrid vehicles, saw its annual revenue of $107 billion eclipse Tesla's.

Despite this outperformance, Tesla trades at a much higher earnings multiple. There are several reasons for this, including investor enthusiasm around future initiatives such as Tesla's full self-driving (FSD) technology and its Optimus robots that will supposedly be able to complete household chores for people. But BYD is also working on FSD tech of its own.

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It's hard to know whether the company can compete with Tesla or whether any car company can successfully commercialize FSD, but I'm more excited about BYD's core EV business. There's still plenty of room to run in the core market, especially when you consider that the company has only begun to sell its products on more of a global scale. By 2030, management's goal is to sell half of its units outside of China. For these reasons, I think the valuation gap between BYD and Tesla can narrow.Data by YCharts.

Lennar: Homebuilders face a challenging environment right now suggesting caution

Berkshire also owns just under $16 million worth of class B shares in Lennar(NYSE: LEN.B). Lennar is one of the largest homebuilders in the U.S. and also makes residential and commercial loans, provides title insurance and closing services, develops multifamily rental properties, and sponsors other funds and joint ventures. The company operates in over 20 states.

Generally speaking, homebuilders face potential challenges this year, as mortgage rates remain high and consumer housing demand remains weak. Some experts think home prices will finally begin to fall this year, but affordability remains a challenge, and it is still unclear where the consumer and economy will head this year. The labor market seems to be hanging in, but other data points to weakness in the consumer. Furthermore, tariffs could increase the cost of materials and broader construction.

On Lennar's first-quarter earnings call, management said it hasn't seen any impact on its costs from tariffs and no labor disruptions due to the Trump administration's immigration policies. However, the company's second-quarter guidance of 18% gross margin disappointed investors and analysts.

Evercore ISI analyst Stephen Kim said in a research note that he is disappointed management would not lower production to reflect lower volume. "As long as market conditions remain how they are, Lennar's strategy to maintain and incentivize volume is going to keep their profitability at dramatically depressed levels," Kim wrote. "So much so that the resulting pressure on ROE will entirely offset the benefit from its recent spin-off of Millrose Properties."

Ultimately, I think the industry faces headwinds until conditions in the housing market improve. Investors can find better places to allocate capital right now.

Should you invest $1,000 in BYD Company right now?

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Bank of America is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Lennar, and Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.

1 Warren Buffett Stock to Buy Hand Over Fist and 1 to Avoid was originally published by The Motley Fool

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