Some Toyota Motor Corp. investors say the automaker's stock is a bargain and poised for gains after recalls involving its top-selling models and criticism of its newest sport-utility vehicle.
Holders including Harris Associates LP and Fortis Investments are betting the automaker's sales and profit recover. The company is recalling more than 8 million vehicles worldwide and has been criticized by the U.S. Transportation Secretary. This week, Toyota's redesigned Lexus GX SUV was called a "safety risk" by Consumer Reports magazine.
Since the world's largest automaker lost $35 billion in stock value from Jan. 19 to Feb. 23, it recovered $15 billion of its market capitalization. Toyota's American depositary receipts gained declined 27 cents, or 0.3 percent, to $80.06 yesterday in New York Stock Exchange composite trading.
"We think that Toyota has more upside than the average name in the portfolio," said Robert Taylor, who manages two funds for Harris in Chicago and is director of international research. Taylor held 11.6 million Toyota shares as of December 31 and says he bought more in the first quarter. He estimates Toyota sells at a 50 percent discount in the market. "We think it's substantially undervalued," he said.
U.S. sales of Toyota's two brands rose 41 percent in March when no-interest loans and other offers increased the average value of discounts to $2,310, up 46 percent from a year earlier, according to industry researcher Autodata Corp.
A Toyota spokeswoman, Ririko Takeuchi, in Tokyo declined to comment on the company's stock value.
Relative Performance
Toyota has slipped 4.4 percent so far this year, while Honda Motor Co. rose 3.9 percent, Bayerische Motoren Werke AG gained 7.5 percent and Ford increased 26 percent.
Toyota is still one of the most highly valued automakers on a price-to-sales ratio at 0.7, trailing only Honda's 0.71 among top-selling public automakers. Ford's ratio is 0.34; BMW's is 0.43.
Several analysts are optimistic about Toyota. Of 23 forecasters surveyed by Bloomberg, 10 have a buy rating, 10 a hold and three recommend selling the stock.
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