I know I picked on Tesla (TSLA) earlier, but that doesn’t mean all auto stocks are ridiculously overvalued. Magna International (MGA) is looking great right now and joining this auto parts supplier on the Buy List is Toyota (TM), my third and final buy recommendation for the month of November.
As you probably know, Japan’s Toyota Corp. is the world’s third largest carmaker, just behind General Motors (GM) and Volkswagen AG (VLKAY). Toyota’s most popular models include Camry, Highlander, Corolla and Prius. The company is the hybrid technology leader and now develops plug-in cars with much more efficient lithium batteries. Toyota is also a pioneer in anti-collision and self-driving cars that are expected to be introduced in the upcoming years.
In its 75 year history, the company has manufactured over 200 million cars and has expanded its operations to include upwards of 325,900 employees across 170 countries. In fact, Toyota Motors has gotten so good at what it does that it has become the gold standard in lean manufacturing. The Toyota Production System, which is known for just-in-time production and minimizing waste, is adapted by companies around the world.
And with about a third of Toyota’s sales going to North America, this company profits from the resurgence in auto sales in the U.S. While October will probably be a lean month due to the U.S. shutdown, the fourth quarter as a whole tends to be a strong sales period for the industry.
As with the other new recommendations, I’m looking forward to Toyota’s next earnings announcement, which is scheduled for November 6. A weak Japanese yen has boosted the competiveness and profitability of Toyota, and we should see this reflected in the upcoming report. Toyota has a tendency to blow analyst estimates out of the water—it posted double-digit earnings surprises for three of the past four quarters.
With strong sales in China, Europe, Japan, Latin America and North America, Toyota is expected to report record sales and earnings for the foreseeable future. “Let’s go places” with Toyota shares. Add shares of this Conservative stock below $139.