Japanese Carmakers Below Invoice! Buy Now?
Psssst! Want to buy Japanese car makers below book value? Now is the time. Spooked by the strong Japanese Yen, stocks of export-heavy Japanese automakers such as Toyota and Suzuki can be had for less than the assets on the books.
Toyota can be bought at a price to book ratio of 0.99. Suzuki is a bargain at 0.94. Mazda Motor, Sony, and Sharp can be had for less than they are worth. The reason? An obscenely strong Yen that is at its highest level in 15 years. (Please remind to shove worthless dollar bills down the throats of any foreign exchange challenged people who still claim that the Yen is artificially low.) But there are also “growing concerns about an economic slowdown abroad.” And you know who they mean with that.
Disconcerting trend: In times of crisis, such as when the existing home sales drop 27 percent, there is a flight to quality. That used to be the Yankee Dollar. Suddenly, it’s the currency of that down and out country called Japan that is assumed to be the safest bet. Isn’t that a bit worrisome?
What’s even more worrisome is that Japanese analysts remain cautious. “Stock indexes showing bargains are not enough to encourage them to start buying again,” says market analyst Masayuki Doshida at Matsui Securities Co.
Back to cars: A strengthening Yen means that manufacturers such as Toyota have to move more product ion abroad. That’s good for jobs. But it takes a while. Short and mid-term, the winners are the export-heavy Europeans, i.e. the Germans. Volkswagen profits heavily from a low Euro. BMW and Daimler were saved from assured extinction by this situation. But pssst again: If the business climate in Europe improves, the currency might improve with it.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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I read this article and the only thought that came to mind was, who has the money to buy? Toyoda still wouldn't exactly be cheap, you can take half off a Rolls Royce and it's still not going to be in my price range.
I still regret not knowing about the yen carry when I had twenty grand sitting in the bank. And now the party's over, and thanks to the stupid dumb weak Euro, my company's products are 35% more expensive in our main market than they were a year ago. I liked it better when there was still a credit crunch. :P
I've thought about buying some Toyota but their dividend history looks weak. I prefer stocks that pay me to hold them. I really enjoy cashing checks. Doesn't everyone enjoy getting a check in the mail?
The car industry has an uphill battle going foward. In the last decade we spent trillions of dollars on 2nd homes, financing college educations and buying expensive cars based on the appreciation of our homes. That era is now over. An interesting article in the NY Times yesterday even argued that homes were no longer a long term value asset. With that said, the cost of cars will either get cheaper( this is why Hyundai is doing so well) or they will adopt the strategy that Ford has the past few years, offer expensive cars like the Taurus and plan on selling fewer of them as the expensive price ensures Ford a profit on the income of the car not the sales volume. Until the US finds a way to leverage something of value besides a house, we are going to see much more pain in the auto industry across the globe.