Honda Motor: Why I'm On Board

| About: Honda Motor (HMC)

Honda Motor Corp. Ltd (NYSE: HMC) isn't the biggest car company in the world, and it's not even the biggest company in Japan. It's not even close -- sales are about half of Ford's, and an even smaller percentage of GM or Toyota's sales. But Honda has consistently been one of the most innovative and reliable manufacturers of cars, and it's an excellent long-term investment.

The company has been growing steadily in revenues and profits over the years, and it may be poised for even greater growth in the coming years. While other companies are hopping on the hybrid bandwagon, Honda has been making these cars for years -- even before Toyota did. Honda's hybrids are more likely to be reliable than the newcomers' cars, and to my mind the Civic hybrid is infinitely more stylish than the Prius, even if the latter has come to be the emblematic hybrid car. And Honda isn't settling just for hybrids -- it plans to introduce a hydrogen car in the next couple years.

In other words, Honda was well ahead of the most important trend in the automotive world in the past couple years -- fuel efficiency -- and its results will almost certainly reflect this fact. It is also pushing to expand into China and Latin America, two markets with great potential for growth. Given its ability to keep production and other logistical costs down, a greater demand for Honda cars will go right to the bottom line.

The auto industry is a competitive one, of course, and Honda won't have an easy road. With other makers pumping out efficient cars, and with China's manufacturers likely to emerge with low-cost alternatives, Honda will have to stay on its game to insure it keeps its competitive edge. But the company has always done this, and I don't see why the future should be any different.

Type of stock: One of the most respected and reliable car manufacturers in the world.

Price target: Honda is a stock to hold for the long-term, and I think it could get above $40 in the next 12 to 18 months. It's currently trading above $36, close to its 52-week high, but I don't think it would be a bad idea to pick it up now. I think this one is going to head mostly up from here. If you're reluctant to buy so close to the top of the 52-week range and you see Honda drop below $35, definitely buy it.

HMC 1-yr chart:

honda chart

About this article:

Tagged: , , , Auto Manufacturers - Major, Japan
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here