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Taking Toyota Out for a Spin
After silver’s meteoric rise last week to nearly $30, I decided to take some profits and launch my own personal stimulus program. So I cashed in a chunk of my position, shoveled $50,000 in cash into a backpack, and sent a friend off to buy a new car. As the price of the white metal soared past $27, $28, and $29, I kept calling her on her cell phone, and kept directing her to increasingly more expensive dealers. First, it was Hyundai, and then Ford. My confused friend finally ended up at Toyota, where she picked a new Highlander Limited Hybrid, a seven passenger, 280 hp V-6, four wheel drive SUV that gets 28 miles per gallon. It also talks to you.
I had more than transportation on my mind when I sent her on the errand. Nearly 40 years ago, when I was starving in Japan while waiting for the financial journalism thing to start paying off, I took a weekend job in Hakone to teach managers at Toyota Motors (TM) how to speak English. Their Plan was to learn our impossible language and then start aggressively marketing their low priced cars in the US.
As we approached the hotel I saw a dozen men lined up out front wearing cheap polyester suits, starched white shirts, and conservative ties. Each one took turns picking up a baseball bat and beating the daylights out of a severely shredded dummy on the ground before them, screaming a maniacal samurai scream. I asked my driver what the hell was going on. He deadpanned: “They’re beating the competition.”
This was back when Toyota made laughably tiny cars that looked like a giant ostrich eggs on wheels and had to get a running start to get up a freeway onramp. By 2006, the company had seized 18% of the US car market, and GM and Chrysler were wearing a toe tags. I guess I taught them well enough.
Today Toyota, the world’s largest car maker, has been slammed by the perfect storm that has taken its share down a gut churning 25% from its 2010 peak. They took eight years to find a defect in an American made accelerator component that caused thousands of accidents, and dozens of deaths, forcing a worldwide recall of 10 million vehicles. Toyota is one of the worst performing stocks in the market this year.
To me, this all adds up to a great screaming “BUY.” You can start with the recall, the largest in history, covering eight models, which promises to be speedy, lavish and generous. It prompted a production shut down, an unprecedented measure in auto history. The company is going all out to reinforce customer loyalty. Toyota still makes great cars. And let’s face it, many people would rather die than drive an American car, the Mad Hedge Fund Trader included.
It’s usually a great idea to buy when there is blood in the streets, and in the auto industry it doesn’t get any worse than this. Toyota has become the BP of the auto industry. I know the Toyoda family well, and they have assured me that they are pulling out all the stops to restore their brand, as well as their own name. When heads roll in Japan, they really do.
There are a few additional angles here. Since the company is Japan’s largest exporter, it would benefit greatly from any weakness in the yen, which I consider as the world’s most overpriced currency. Think of the stock as an long dated yen put. Look at the charts for Ford, US cars sales, and the palladium used for catalytic converters, and it is obvious that the world is seeing a surge in global car sales.
I know the philosophy, and the strengths of this company intimately, and they will come roaring back. Let the ruckus over the recall burn out, and add Toyota to your “buy on dips” list. Keep in mind that this is not a day trade, but something to bury in your portfolio and then lose behind the radiator. It will also not be immune from the calamites that strike the stock market.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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Living near Nagoya, Toyota turned out to be one of the favorite buy when blood is on the streets(i.e. Lehman) stocks around here, although I put 100% of my entire liquid assets into Makita, which is another local company and performed better than Toyota.
I think Toyota is a pretty good company to invest in (but not to work for due to the high number of suicides and depression), but the love affair with LiB in the car industry is getting scary. LiB aren't safe stuff. The chance of having an explosion is multiplied by the number of battery cells inside a car with LiBs. I think there are better ways to diversify your portfolio than Toyota Motors. How about other Toyota group companies like Denso, JTEKT, Aichi Steel, Toyoda Gousei and stuff? I prefer all of them over Toyota motors.
#Disclosure; Work for a firm providing machinery and components for LiB production for major auto manufacturers in Japan.
Have a 2001 Toyota Highlander AWD 6 cyl. The most reliable and troublefree car I have ever owned. 140k mi. Nothing but tires, and oil changes.
I purchased a Toyota Venza w/ every available option Toyota made available. It's the BIGGEST PIECE-O-SHIT I have ever owned. The HID headlights (camera) has failed not once, but three times, I have massive right-side torque yank when passing on the highway, impossible to find source of interior noise, won't ease out of hill assist, and worst of all, it now sounds like Ford Super-Duty (diesel) in the morning. Almost 40k for a 20k car. Even the navigation system interface, compared to what's out, is deplorable. They didn't even bother to load current software for the voice-activation.
My neighbor bought a Highlander too. No problems until he hit the end of his warranty. Spent 6k since then on tranny and engine. People, these cars are crap.
I'm one of the many that bought Michigan-built Detroit metal, despite the bailouts. Quite happy with my Aurora, and would have chosen it over an equivalent year Camry. I'd rather go long with GM until the transplants start building Detroitish metal in the Manufacturing Belt.
No, I don't care for the golfcarts from Toyota, as they know not the Detroit way of throwing the granola-eating crowd to the curb.
IMHO, I like Japanese cars, and Although I like driving my WV CC right now, Subaru probably has some of the finest engineers on the planet. My WRX was a monster of a car pushing and incredible amount of hp out of a 2.5L block. The latest iteration of the STI has one of the worlds most advanced drive-trains, outclassing lambo's 4wd system. FWIW the recession has barley touched their sales #'s
Duplicate post
Looking out the window at my three Toyotas a rush of warmth comes over me. Thank God I don't own a Audi, MB, or God forbid a GM, would rather drive a Hudson than those three.
My GF just leased a 2011 Hyundai Sonata Turbo. 274hp, 4cyl, 30+mpg, good warranty. A Camry killer.
A Camry copy from a company that can't make an original car.
Will this car be on the road in 2031. Put 20 years on a 90 Camry and have a 14 yr old Avalon hand me down that I plan to drive for another 6 years before I'm in the market for another car.
its a 3 yr lease and under warranty for 100k I think. One of the sharpest cars on the road in its class for sure. You'll hear about Hyundai in the next few years as a rapidly growing company.
and you'd have to be willing to drive a hyundai...
Toyota is living proof that the problem is "Bigness"
I mentioned this to James Kwak once, the connection between Toyota and TBTF banks and he didn't seem to see the connection. When Toyota and the Japanese were hungry and still listening to W. Edwards Deming they never would have farmed that stuff out to the Chinese village idiots to make.
My 25+ year master Toyota mechanic recommends only buying vehicles made inside Japan...those U.S. made parts/vehicles are the most common things he works on...
Interesting you should say that ... my 2003 Echo, Japanese made, is past 155K miles and still going strong. Everything is solid on it (though it has a lot of cheap plastic). Paid $12,400 and got offered $2500 on a trade in.
Interesting you should say that ... my 2003 Echo, Japanese made, is past 155K miles and still going strong. Everything is solid on it (though it has a lot of cheap plastic). Paid $12,400 and got offered $2500 on a trade in.
what if you could access a vehicle's controls remotely to create
unintended acceleration? one could have a field day trashing a
brand's reputation and stock price. not to mention a jackpot
payday for all the lawyers when class action lawsuits get fired up;
the mind boggles with the possibilities.
http://www.technologyreview.com/blog/editors/25181/
I wouldn't buy Toyota with your money. First of all the accelerator problem isn't fixed. Every week somebody wraps their Toyota, Lexus, around a tree. One car accidents, no cause given. Secondly the problem was electronic, which Toyota hasn't aknowledged because (probably) the faulty circuit boards are made in China. More than a dustup over fishing rights here. Third, in the heyday of Japanese cars ( I bought a 75 CVCC, 5 speed front wheel drive, 35mpg) nothing in America could compete with that car, and it got me over snow and ice while 4wd couldn't. Now they all have 4wd, and all the other stuff, point being if i was going to buy a car I would buy the first one I saw (unless it was a Toyota) because they are all pretty much the same.
Fourthly the used car market is filled with lease cars which are low mileage, as the car markers overbuilt product for the last ten years. Take advantage of it, by a good used car for going back and forth, and rent a car if you need to take a trip. As for talking cars, rear view video cams, forget it. Just remember what it is you need, (transportation) and figure out the cheapest way to get the job done, (ex Toyota) all the options are fungible, but branding and comparing cars is like apple pie, and I know people will argue with me until they're blue in the face, but one car is about the same as any other, (unless its a Toy)
Difficult to argue with flawed logic, inaccurate facts/propaganda, and blind stupidity.
Can I interest you in an ice cream glove? They come in 52 flavors...
so buy the stock, lover, it's your nickel