Kiplinger's Stock Watch - April 24, 2007
..Toyota cars have fewer defects than any other make, and Toyota has
several other advantages that make the company a compelling investment.
To start, rising gasoline prices are likely, and Toyota is a leader in
hybrid technology. It opened its first U.S. hybrid car plant in
Kentucky last year. And while Ford and GM are closing plants, Toyota
plants here and abroad continue to operate at full capacity, points out
a Citigroup research report. Toyota employs as many workers as GM, it
just does so much more efficiently. In fact, the last time Toyota had a
big layoff was the 1950s.
Toyota is a financial juggernaut. It has been the world's most
profitable automaker for years. When earnings slip a bit, the headlines
aren't about layoffs and restructuring, they're about the company
sinking more yen into research and development or quality control...
=========GM vs Toyota vs Ford, 10-year chart: http://tinyurl.com/36zcgl
GM's and Ford's earnings have not slipped a bit. They nose-dived.
I think the bottom line is that Toyota and Honda think a lot more about the
long-term growth of the company compared to Ford, GM and Diamler Chrysler.
I do see more long-term thinking at the Michigan-3: I am impressed with the
cars all three have introduced in the US in the last 2 years. And Chrysler
is making great improvements to its minivan.
We had to come up against them in the specialty chemicals business, and they
were formidable. Apparently the Japanese have (or had) strong support from
financial sector to allow them to spend time and money in development and
market control. (I suspect the Japanese worker is the one who makes the
sacrifices in terms of taxes,etc, and the industries stand to gain from this
Never think, however, that they are not innovators nor that their technical
sector is not equal to ours. Our children seem to be suffering from
and underachievement, while theirs still work hard to learn and achieve.
This is not a short term challenge for the USA. We have a problem, and it
Unfortunately, Wall Street is too often driven by next quarter's results.
The results 5 years from now is more important.
It is very sad when you see American kids who gifts are wasted. I see it
every day in NYC, where there is not nearly a strong enough culture of
learning. This same culture is in every American city. Fortunately, there
people who are able to give these kids a real chance, like those who sponsor
I Have a Dream programs and Harlem RBI.
Sadly, some inner city youth are more likely to spend time in jail than they
are to go to college. What a waste.
We also have a solution: It is us.
As they say, if you are not part of the solution, you are part of the
Absolutely, Jeff. I saw an interview with Bill Bradley this morning, and
his attitude is
so very positive. He said, basically, that we dont need 'leadership'. We
need to organize
ourselves strongly and TELL our elected servants what to do. We certainly
much from them, historically.
The American people are good and strong. But we have to get our of our
and get our business in order.
If we cannot or WILL NOT enforce our borders and immigration rules, what
sort of worthless
people have we sent to Washington. We need a Million Gringo march, or
Yes, certainly. My great-great-grandparents came from Germany and
Switzerland. When they came here, they came with a great work ethic. My
great grandfather worked in the mines in Scranton. My grandfather that coal
around on the back of a Ford Model A pickup truck in the winter and ice
around in the summer.
We certainly should march all these Gringos. Strait to the schools and the
libraries, with all the people in the US. What this country needs is
brainpower. Our inner-city kids, our country kids, our suburban kids,
whether they are citizens or not are our main resources. We need to work
together to make this a better country.
But in the end that is just another lame excuse. Unless a company is
selling it's own stock then it really doesn't need to care about the
short term stock price. Companies which grow and prosper over time are
always rewarded with a strong stock price over time. It is the idiot
short term managers fault if they listen to the noise from analysts!
Not entirely accurate...
According to JD Powers the leader in initial quality is Porsche,
followed by Lexus, Hyundai, and then Toyota.
For long term dependability JD Power ranked Toyota fourth behind
Lexus, Mercury, Buick, and Cadillac.
In either case the difference between Toyota and "average" is trivial
and probably not statistically meaningful (I can't see how 0.3
problems per car can be significant). One study recently concluded
that Ford and Toyota quality were in statistical dead heat.See :
If it employees as many workers as GM, yet, at least until now, sold
fewer cars, how can they do "so much more efficiently?" The statement
seems wrong, although the sentiment might be right.
And although Toyota might be doing well in the US and Europe, in its
home market, it sales are down more than 10%. In contrast, outside of
it's home market (the US), Ford is doing well, but it sales are down
13% in the US. So when the press talks about Ford, they always
emphasize the US problems. Why is it when the press talks about Toyota
they skip over it's home market problems and emphasize the US results?
So why then has Toyota had major quality problems in recent years? In
2005 Toyota recalled more cars than GM or Ford. Why does the US press
rarely mention this?
Here are some other references regarding Toyota quality:
For an example of how irrelevant this is, see
Personally, I'd recommend against investing in any automobile company.
But I suppose if I wanted to invest in the segment, I'd go for the
undervalued company - and I can't see how that is Toyota. The long
term trend has for Toyota to track lower than the major averages. With
the recent run-up in the price, it has greatly out performed the
averages. I would expect the price to drop back to the historical
trends in the longer run, making an investment in Toyota risky. This
has nothing to do with the quality of the cars, so no matter how good
the cars are, I don't think the stick is a good bet. But that is just
What's their long-term survey, now? Three years, isn't it? My "new" car is
Whatever difference there is seems to make a huge difference to the
manufacturer. It's probably not precisely an apples-to-apples comparison
and it's a little old but this article on warranty casts an interesting
light on vehicle reliability...
This essentially cuts the gross profit on each GM and Ford by 1.3% relative
to Toyota and Honda.
The difference to that the only thing Ford knows about auto
quality is how it looks parked on Dearborn Street.
And the only thing morons on Dearborn Street knows about quality
is how it looks parked on top of an apple salesman.
=The last stock investment advice I got on a Toyota oriented group was
at the Google IPO it said "but don't buy their over priced stock" when
it was around $100.
I bought Toyota (TM) at $78 based on the reason in the first post and
it has done just fine. Only wish I'd been able to invest more. The
growth going forward is in Asia. GM has essentially donated much of
their technological expertise to the Chinese in joint venture
partnerships to gain market share where now the Chinese are gaining on
GM in their domestic market using skills learned from them. Toyota
refused to partner and divulge secrets yet their sales in the region
Seems the biggest domestic drag on auto sales is the maxed out
I'm still looking for the next great thing. The key is to be ahead of
the curve when it comes to trends.
BTW the other post that said Lexus is number two in quality not Toyota
- Lexus is a Toyota brand.
Based on future potential, I think it was over valued at $100. That
just makes it wildly over valued at $135. The problems with stocks is
that people treat it like a casino game. Sooner or later the big boys
will cash out, and the ones who aren't quick enough will be left
holding the bag. I'll assume you are a long term investor - do you
think relative to the market averages, Toyota stock will do better or
worse in the next ten years? I'd bet on it doing worse than the market
average. This has nothing to do with the quality of the cars or the
greatness of Toyota technology. It has everything to do with the
competitive nature of the automotive market place. The significant
areas for future growth are India and China. Neither of these
countries is going to be like the US and hand an industry over to the
Japanese. They'll do the same thing to Toyota that the Japanese did to
Ford 75 years ago - learn from them and then kick them out. Automobile
sales in Toyota's home market are down significantly. Toyota sold over
10% fewer car in Japan last year than the year before. They were able
to maintain production at the Japanese factories by shipping more cars
overseas (they actually increased the percentage of imported Toyotas
sold in the US so far this year). What happens if the US goes into
recession? What are the chances that US manufacturers will start
competing in the low end market again? The economics of hybrids is
not particularly attractive. What happens when the WOW factor wears
Good luck. Timing can be everything. You have over a 70% profit. What
are you holding out for?
But at a slower rate than GM. And Toyota does have Chinese partners.
How about 5 years of ever increasing sales. Just how many new cars do
people need? I've done my part, 6 new vehicles and 3 used ones, in the
last ten years. Unfortunately my SO is not doing her's, only 3 in ten
years (she had to replace her Chrysler van, and got cars for the
kids). The people in the Toyota newsgroup all seem to believe that
most Toyota owners keep their cars for 10 years or more, so the
replacement market for Toyotas is heavily dependent on converts from
other brands. It seems to me many of the easy targets are already
driving Toyotas or Hondas. Where are the buyers going to come from to
keep sales going up? What do you think Toyota share of the US market
will be in 10 years?
Yes, definitely. Being ahead of the trend when it comes to automotive
stocks is getting out. And since Toyota's stock appears to be the
most over valued auto stock it would seem to me that selling it is
staying ahead of the curve. I can't imagine that the upside is another
70% increase in the next 2 years.
And Mercury is a Ford Brand, and Buick and Cadillac are GM brands. All
modern cars are very close in quality. The differences in most of
these quality surveys has more to do with perception than reality and
the results are so close that the top brands are likely in a
statistical dead heat. Since Toyota quality is largely based on
perception, it can change rapidly. A few more years of record recalls
and Toyota the myth of Toyota quality will be dispelled.
The fun thing about stock investing is that both of us will likely be
right if we pick the right time period. No stock continues upwards
forever, so at some point, the price of Toyota stock will go down. At
this point I can declare myself right. Eventually it will go back up,
if for no other reason, long term inflation, at this point you can
tell me "I told you so." Enjoy.
I am excited to report my TM stock has increased 50% January 2005. I
only wish I had bought more but I can't complain about my CVX stock
that has increased the same amount since I bought it three days
"Underlying most arguments against the free market is a lack of belief
in freedom itself." ~ Milton Friedman
What do you actually get when you purchase Toyota Stock? I assume you
are actually buying American Depositary Receipts for Toyota Motor
Stock. What bank holds the actual shares? Do they keep a portion of
the dividends or sales price to cover their expenses?
Personally I'd be nervous holding onto a stock trading at 2 to 2.5
times it historical average.
I buy my stuff through mu online securities dealer, Etrade. The only
thing I have to show that I own any stock is my monthly statements and
the sales form. You don't get actual certificates anymore unless you
buy directly from the company.
In most cases you are right about overpriced stocks but the rules are
changing and yield/dividend or PE ratio is not always the primary focus
when purchasing stock. Besides, Toyota Motor Company certainly has the
capital and long-term focus to back up its current price.
Look at IBM circa 1978....As soon as you see a graph going up at an 45%
angle and hear executives talking about growing at that rate into the
future - RUN AWAY! Toyota has a fair amount of room to grow - assuming they
can take down at least one of the US big three , over come the Chinese
distrust of Japanese companies, keep the Koreans at bay, hope that the
Chinese don't take over the lower priced market, .......you get the picture.
Again, RUN AWAY. Sometimes the Bulls win, sometimes the Bears win, the Pigs
always get slaughtered.
I see what you mean. Those big companies like SprawlMart, ExxonMobil and
CocaCola never do well. ;-)
Actually, Toyota is making a ton of money in North America, and is growing
in countries like India and China. Hey, even Ford is able to make money
overseas. As more and more areas are being industrialized, more and more
people want to buy cars. Toyota has a lot of room to grow.
=IBM looks good to me again. They had the largest number of patents
issued last year, sold their PC division, have bulked up on profitable
acquisitions, are reasonably priced, and their margins are good.
I am not sure selling their PC division was a good idea.
But, overall, I think IBM is a good buy, for the reasons you cite, but the
fact that they still make a bunch of money from mainframes and they do a ton
of consulting for iCommerce (the 'i', in this case, stands for "IBM", not
About 6 years ago, I open an account with an internet bank, Lighthouse Bank.
The bank was owned by Brookline Bank in MA. The bank was a part mutually
owned and part owned by shareholders. As a depositer, I had the option to
buy shares at $10 each. When I got my three hundred shares, I got an actual
stock certificate. I had a retail account at Fidelity, so I took the stock
certificate there. I later sold the shares and made like 60% on the deal. I
just wish I had more money back then so I could have bought more shares.
That was the only actual stock certificates I actually owned.
You can buy stock certificates for companies like Disney and Hersheys. They
are meant mostly as gifts for kids. It costs only $143. Most of that is for
the frame, transfer fee and such. THe stock is worth $55.
On a recent episode of Sound Money, there was some rich guy who is barely
out of the fortune 500. That rich guy has the weird had of getting actual
stock certificates rather than trading electronically.
I disagree. There are many things to look at like the business model,
company leaders, history, and future trends in the industry as well as the
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