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Archive for Friday, February 12, 2010

Is Toyota stock now a bargain?

Despite recall, firm still made profit

February 12, 2010

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— You can hate the cars but still love the stock.

Lost in the flurry about Toyota Motor’s recall over faulty gas pedals and brakes was news of a remarkable feat for an automaker these days: The Japanese company actually made a profit last quarter.

Which raises a possibility: If Toyota strings together more profitable quarters, will investors kick themselves someday for missing a chance to have bought into it?

Sean Thorpe, co-manager of foreign stock investments at Reed, Conner & Birdwell in Los Angeles, thinks so.

“Recalls can be a buying opportunity,” says Gene Grabowski, senior vice president of crisis manager Levick Strategic Communications.

Buying on bad news, recalls or not, has been the route to riches for many famous investors. The late philanthropist John Templeton made a killing scooping up slumping shares in dozens of companies in 1939, and with borrowed money no less. Warren Buffett bought stocks during the bear market of 1974. Instead of fear, he felt, as a magazine quoted him at the time, “like an oversexed guy in a harem.”

Of course, plenty of bold investors have got it wrong, such as billionaire Joseph Lewis, who put $1 billion into Bear Stearns before it collapsed.

The question for Toyota investors: How much worse is the news going to get before it gets better?

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