Anyone Buying Toyota Stock?

[Viking]

To ask a question a few on this board have likely thought about... Is anyone purchasing Toyota stock at current prices? Since their brake problem came to light, the stock has fallen from $92 to $73 = 21% decline. My read is I don't have enough information yet so to purchase right now would be more of a speculation that an investment (and the stock is not cheap enough to get me interested ihn speculating. My guess is they will get through this and the company and stock will bounce back. Not exactly like the salad oil scandal and AMEX. Anyone working in the industry with any thoughts?

 

http://stocks.investopedia.com/stock-analysis/2010/Toyotas-Recall-Isnt-A-Company-Killer-TM-F-DAI-HMC-FIATY0203.aspx?partner=YahooSA

[KFRCanuk]

Back in the 80's 60 Minutes ran a story about unintended acceleration in Audi 5000's. Sales of 5000's collapsed over night. It took audi 15 years to get back to the same sales levels. The 5000 name had to be abandoned.

 

I think it's going to take a while. Not 15 years though.

 

On the geekish side of things,  the Woz seems to have found a bug with the cruise control on his prius http://news.cnet.com/8301-13924_3-10445564-64.html

 

[Partner24]

No. It's tought to me to get a clear view about the long term consequences of the recent turmoil around Toyota (in doubt, I try to avoid) and the long term growth prospects of TM are somewhat limited. JMO.

[beerbaron]

I started asking Toyota owners this week if what is happening influences their opinion on Toyota and all of them said they would buy another Toyota tomorrow. So I don't believe there is long term harm to the brand. I would recommend you do the same thing and ask people around, the peoples around me are not a great sampling.

 

I work in the product production field and this kind of stuff happens one day or another. This is inevitable, the only thing you can do is reduce the odds trough good QC, Engineering, Trough Testing, etc...

 

Now if I would buy Toyota... I have no idea. I find it hard to put a valuation on this company. Maybe others on this board have done some analysis they want to share.

 

BeerBaron

 

[mranski]

Audi in the 80s was a totally different animal. I never saw one without a hook on it. I like and own a toyota, but the criticism of toyota not reacting quickly to the problem I think has some justification. There was a problem with camrys in the 90s (not life threatening) that imho was recall but was never acknowledged. Don't like auto manufacturers almost at any price, so not looking at the price. But it might be a good trade.

 

 

 

 

[Uccmal]

I've thought about seeing if I could score a deal on a Toyota Vehicle.  Will take a pass on the stock.  The competition in this business is absolutely brutal, and the stock has traded cheaper than this.  Toyota used to have a lock on quality but they now have to do battle with everyone else.

 

Good cars though.  

[Guest kawikaho]

The Prius cruise control acceleration isn't a problem, IMO.  My old Honda Civic did the same thing if you enabled cruise control, and hit the accelerate button instead of the set button.  All you had to do to disengage was hit any other button for cruise control.  

 

I'm looking at Toyota too.  But, you're right, the price hasn't come down significantly enough to warrant a speculative buy.  Earlier last year, Toyota suffered some big losses due to a slowdown in car sales.  Car sales are still weak, after gov't incentives have expired:

 

http://www-ac.northerntrust.com/content/media/attachment/data/pasted_image/1002/document/bkh1_02162957_10442781.jpg

 

Toyota just released terrible sales #'s for Jan, and I believe sales will get worse for them.  I believe car sales will rebound late this year due to pent up demand, but how much of that will go to Toyota is anyone's guess.  I think more sales will go to Ford--probably not so much for GM, considering all of the negative reactions to their bailouts, etc...  No one in America supports the banks, financials, and GM.  I think Ford will outperform.  

[Daytripper]

Right now, you might get a better deal on a Toyota vehicle vs Toyota stock.

[EdWatchesBoxing]

I support Toyota by being a car owner. I don't think I would ever buy an auto stock.

 

I love reading about their culture and production methods though.

[Ballinvarosig Investors]

I think the AXP/Salad-Oil Scandal analogy is definitely appropriate here.

 

The financial cost of the recall to Toyota will be $2 billion - give or take a couple of hundred million. The stock on the otherhand has been cut by tens of billions. It seems the assumption of the market is that the Toyota brand has been quite severely damaged by the incident. The question here is that assumption valid?

[Guest kawikaho]

http://finance.yahoo.com/news/Toyota-posts-17B-profit-apf-1568945163.html?x=0&sec=topStories&pos=2&asset=&ccode=

 

Pretty sure the improvement in their #'s were from gov't incentive programs.  I'd like to see how their Q1 2010 #'s are like.  I would wait for some serious technical meltdown to tip toe into their common, or leverage into options.  I'm starting to like this story.  Saw this happen to Merck with Vioxx several years ago, and bought some of their stock when it tanked 35%.  

[JEast]

Briefly, but we have talked about 'Toyota Industries' on the board previously. It is my belief that the better deal is played their as they are essentially selling very slightly below book when you consider their tremendous amount of marketable securities on the balance sheet, of which is 6% of Toyota stock.

 

I had the opportunity to talk to Marty Whitman last summer about this stock and asked if he thought it was a 'value trap'. His reply is long as it is cheap and safe, it is never a value trap, just opportunity cost.

 

Anyway, I have been buying Toyota Industries this week.

 

 

Cheers

JEast

[value-is-what-you-get]

I don't know much about Toyota stock but I do own a Toyota and I think that cars in general are very much commodities these days with the minimum standard of durability and quality being quite high across the board.  All the major competitors make similar (almost indistinguishable) models for the bread and butter middle class markets.  What I do notice is that the Toyota Dealer experience is outstanding.  This may be specific to my Dealer but since my gas pedal has never stuck (it's not one of the affected models) I have no negative bias towards the brand and I expect the severe negative bias away from the brand will be experienced mainly by those who actually experienced a stuck pedal and their immediate circle of friends and family to whom they tell the harrowing tale.  I don't buy new vehicles (buy 2 years old sell 4-5 years old - mileage dependent - cheapest form of vehicle ownership - thanks Lemon-Aid) but the local Toyota Dealer sure treats me well (complimentary food, internet enabled workstations, complimentary massage or manicure while you wait) considering I didn't even buy the vehicle from them and I just go there for oil changes and one warranty claim.  The reality is I go for oil changes on massage day because I'm not much for manicures (tough guy!).

 

I won't buy a Ford for the exact same reason - Dealer quality.  The cars may be fine but my local Dealer treated me like everything was my fault and routinely called flaws in quality "normal".

 

The media and competitors won't get this to the tipping point of permanent damage to Toyota because it just won't directly affect that many people whereas the fresh baked cookies and complimentary massage/manicure are available to all their customers.  I know it's for all the wrong reasons but it works!!

 

 

[SharperDingaan]

 

If this were GM or Chrysler you wouldn't know about it; as US culture is to keep producing - & if you kill a few people its just part of doing business. Toyota shuts down its plants, does a massive global recall, & has its reps out in front of the cameras getting the information out. An attitide that has made them #1, & relegated most US producers to 'also rans'. It'll cost them most of their 2010 profit, but lasting global brand damage ? - pretty unlikely.

 

Most wouldn't try to catch a falling knife, & would let the 'voting' machine feed on the negative hype. At some point it'll find a bottom, & we'll all be shopping  ;)

 

SD

 

 

 

[A_Hamilton]

Just a note, but if you are going to buy TM, you are better off buying TYIDF, which is TM's parent. You'll pick up their forklift subsidiary for free, on top of your exposure to TM.

[txlaw]

On the geekish side of things,  the Woz seems to have found a bug with the cruise control on his prius http://news.cnet.com/8301-13924_3-10445564-64.html

 

 

Ha! :D  I saw that.  When the Woz speaks, I listen.  Especially when he talks about a potential software glitch causing problems!

 

I'm kind of worried that we're going to find a bunch of problems with the electronics in not just Toyota cars, but other automakers' hybrids as well.  These guys were just on the brink of collapse, and they would have been incentivized to keep quiet about any problems during that period of time.  I really hope not, though.

[benhacker]

On TM vs. TYIDY, I think the stub is no longer free, so I think those saying so haven't run the numbers recently... maybe my math is wrong, but the stub is at a high from recent past.

 

Ben

[twacowfca]

Toyota is a great company in a lousy business.  It's a long term value trap.  Their ROC doesn't come close to beating a minimal threshold for an equity premium.  ROC has been no better than 7%, even in their BEST year in their recent cycle!

[alwaysinvert]

Funnily enough I was looking at Toyota these past few days because of this situation (reminiscing reading the salad oil scandal as well), and what do you know, of course there was a thread on it here :) If they drop down a bit further I might pull the trigger... I guess I am as weary as the next person of auto manufacturers, but there has got to be a point where you can own a quality one like Toyota too, even if not for the very long term. For Toyota I guess that point would not be thaaat far below book value but who knows. With me current knowledge of the auto business I guess the safety margin would have to be way high.

 

Long time lurker btw. Hello to all of you :) Oh, and please do shout at me if I don't make any sense or my grammar is unbearable in this or future posts. I am not a native English speaker and need to keep learning.

[twacowfca]

Welcome, alwaysinvert.  :). If I could communicate in a foreign language half as well as you do in English, I would be very proud of myself.

[arbitragr]

I don't think the salad oil scandal is the same as this. Salad oil scandal had nothing to do with the core business of AXP, which was cards - the use of AMEX cards. So you could take advantage of the short term scare. What does a salad oil inventory scandal have to do with my purchases using an AMEX card?

 

However, cars, and the safety of it ... have everything to do with toyota's core business. It's like saying should you still buy GOOG if their search technology started to degrade in quality? or if news corp stopped producing high quality content, but started focusing on user generated content ... which is not their core skill set, would you still buy NWS?.

 

Back in the 1990s Ford had multiple problems with sudden acceleration and their SUVs rolling over. They never recovered and lost leadership to Toyota and GM:

 

Much like china (the ornaments, not the country), brands take a long time to build and an instant to destroy. Even AAPL had problems during the late 90s and took a while to recover - years!! (only when Jobs came back). AAPL's core business started to degrade - which was computers and computer-like hardware devices (i.e. consumer electronics devices).

 

If this persists, and Toyota aren't up front about things, they lose their integrity, and people will eventually lose trust in the product.

Would you see a heart surgeon who had a history of malpractice??

[alwaysinvert]

Welcome, alwaysinvert.  :). If I could communicate in a foreign language half as well as you do in English, I would be very proud of myself.

Thank you. Coming from a small European country, mastering English to some degree is almost a must (and getting bombarded by American culture helps alot!). If you already are fluent in the most important language, there isn't that much of a problem in not having a second one, I would say. Oh, and i cheated and lived in London for a couple of months some time ago :P

 

 

Regarding Toyota vs salad oil; I do agree they are far from the same kind of animal due to the reasons arbitragr stated. And I don't know how to get a good handle on the changes in the company's reputation without it being common knowledge. So probably this will stay in the too hard-pile (unless stock plunges alot more and risk/reward gets good anyway), but nothing bad can come from monitoring the situation. And you should know that this is not at all well covered in Europe and I suspect the same goes for Japan, so the question is if it will affect sales in those regions at all.

[JEast]

Just for specifics on Toyota Industries based on the latest quarterly report, book is around 3700 vs. roughly 2500 today.  (The 3700 number includes their large holdings of marketable securities.) Even if you remove the goodwill of roughly 300, it is still under book. However, one could argue that goodwill is understated based on relationships and name brand, but that is up for debate.

 

Falling knife? Maybe. Screaming buy? Not yet.

Solid company with a good balance sheet to weather the storm? Yes.

 

 

Cheers

JEast

[Mark Jr.]

The congressional hearings (they put on a real dog and pony show today, replete with crying soccer moms, etc) and the entire saga just took on a quality of severe overreaction and hysteria. The cynic in me suspects the entire thing to be a put-up job, now that the USG owns their competition.

 

I generally don't consider car companies because they're outside my circle of competence but I think people are just running around like chickens with their heads cut off and selling this thing out of pure emotion.

[Myth465]

I didnt watch the hearing but cant see it as over the top. Toyota put peoples lives at risk for profits. There really is no way to spin that. Google the police tape of the off duty cop in his car that wont slow down. He dies seconds after.

 

Tell me if you were related to him that you wouldnt be slightly pissed off.

 

Ford did the same years ago as well so the US makers arent much better. Call a spade a spade.