Warren Buffett's Berkshire Hathaway Inc earned a US$1 billion paper profit from an investment it agreed to make in Chinese carmaker BYD Co less than a year ago.

Billionaire investor Warren Buffett (R) receives a BYD car model as a gift from BYD's Chief Executive Officer Wang Chuanfu in this file photo. Buffett's Berkshire Hathaway Inc has realized a US$1.02 billion paper profit on a 10-month-old investment in BYD Co after shares in the mainland car and battery maker quintupled.

The automaker has jumped fivefold in Hong Kong trading since the deal was announced on September 27, helped by Buffett's investment and rising demand for fuel-efficient vehicles. Three days earlier Berkshire agreed to an investment in Goldman Sachs Group Inc that has since generated a paper profit of about US$2 billion.

"When Warren Buffett says the sun shines out of somebody's backside, it's worth paying attention," said Guy Spier, principal at New York-based hedge fund Aquamarine Funds LLC, who owns Berkshire shares and has researched BYD. Buffett is "betting on the jockey in this case," Spier said, referring to BYD's Chief Executive Officer Wang Chuanfu.

Berkshire's MidAmerican Energy Holdings Co unit agreed to buy 225 million new shares of BYD for HK$8 apiece. That stock now has a market value of HK$9.37 billion, based on Thursday's closing price. Buffett will pay HK$1.8 billion.

BYD said on Thursday night it completed the sale. Buffett didn't respond to a request for comment.

[Wu Changqing / CFP]

The investment may help BYD, the seventh-biggest carmaker in China, boost its profile overseas and also reassure potential customers, Chief Executive Wang said last year. The automaker started selling the F3 DM, the world's first mass-produced plug-in hybrid, in December.

"Investors are buoyed by the potential growth in BYD's electric-car business," said Barry Leung, an analyst at Sun Hung Kai Securities in Hong Kong. "The alternative-energy sector is clearly one that will continue to enjoy the support of the Chinese government." Leung rates the carmaker "buy".