Thursday, February 15, 2007
Toyota building a Factory in India
Toyota building a Factory in India
There is no other company in the world so aggressive and successful as Toyota motor company. They make inexpensive cars and sell them at high prices with all the fixings. Not to mention most Toyotas make it past 250,000 miles.
That said, let’s look at this with an open mind. I know many a World War II veteran who would never buy a Japanese car yet alone invest in a foreign company. Put the guns and nationalism behind, because they aren’t going to help you with your money. Put your money where the money is, not where your mouth is.
Now lets look at this fundamentally. Toyota has the legacy, the money, and the ability to produce cars to completely destroy anything Detroit could produce. And for all intents and purposes they have. GM and Ford can’t keep up with the competition, that being mainly Toyota .
The simple facts about Toyota :
Market Cap: 237.88B
P/E:16.03
Forward PE: 14.2 (PE one year from now with expected earnings)
This stock is IT! Huge growth prospects and outright cheap, but I think we could see it come back down in price, ripe for a snatching.
Price to earnings, a factor I rarely give the time of day, is cheap. A stock with the growth prospects like that of Toyota should be selling at even a PE of 25. Right now, I see this stock undervalued by 50%.
Competition
Competition from companies such as GM and Ford is less than nothing, truly. Toyota has more effective and less expensive health care and pension programs than American corporations. And it is these same things that have really put the financial strain on American automobiles.
GM and Ford have resorted to building more expensive, higher margin automobiles, aka SUVs and big trucks. These products, I believe, have come out of favor with consumers of the 21st century. High gas prices and a limited need for such obscure automobiles leaves little money to be made.
Toyota and Honda have simply pioneered the future of hybrid and other fuel efficient cars. Toyota has the prominent Camry and Corolla lines in both regular and hybrid forms. Its products like these that keep the automobile industry moving forward while their competition stays in the dark ages.
This new factory allows Toyota to enter the coveted Indian and perhaps eventually Chinese markets. It is expected that India will grow into a country with one of the largest car ownerships per capita. India is experiencing extreme growth rates from telemarketing and customer service job openings. Outsourcing to Indian labor provides inexpensive alternatives to companies that can then pass the savings onto the consumer.
I expect the Indian populations to start buying personal cars. Today’s India is much like that of post WWII America.
It is in these Asian markets, Japan included of course, that Toyota will reach global dominance as an autmobile manufacturer. I can foresee Toyota stock trading at a single digit PE and a stock price of $200+. This is the value play for 2007 and beyond.
Pickup some of this stock if you want a play to protect yourself from a falling dollar, a slowing American economy or to invest in a company that is leading the way in its field. Simply, this stock is it.