By Timothy Lutts
I think not, and here’s why.
Toyota (the company) enjoyed a great long uptrend in its fortunes, thanks to its ability to design and build high-quality cars that were affordable. People grew to trust Toyota more than any other car company on earth. And over the same period, the company’s stock enjoyed similar growth.
Part of the stock’s growth was absolutely reasonable, reflecting the company’s fundamental achievements, but part of it was irrational, reflecting people’s growing love of the company. And while the stock’s collapse to date may accurately reflect the logical loss of earnings power, I believe it does not yet accurately reflect the loss of that love.
The fact is, in millions of households all over America, people are angry at Toyota for failing them. People who once automatically bought Toyota’s cars because they trusted the company (a fact that was more important to them than any technical feature) will now look elsewhere. Toyota has failed them, and like any lover who’s been disappointed, they will hold a grudge.
One of the truisms in our business is that trends tend to go to extremes. They last longer than expected, and they go higher or lower than expected. And so, I believe, it will be with Toyota. Yes, there will be short-term bounces, and profit opportunities for traders. But Toyota’s best days are over. I wouldn’t touch the stock with a 10-foot pole today.
If you’ve got to own a car company, Ford (F) is still attractive. But that’s a story for another day. Today, I think one of the best sectors for investing is in medicine and health care. More on that here.