What can we say? It’s hard to complain about a day when Coca-Cola (KO) suddenly jumps 3.7% on better than expected quarterly results. Or when three utilities along with Royal Dutch Shell (RDS.B) and Schlumberger (SLB), hit new 52-week highs,
Come to think of it, there’s really just one thing that leaves value investors like us less than utterly thrilled about the current stock market environment. We can’t find enough bargain stocks to buy!
Mr. Market seems to be in the early stages of fashioning a remedy for that problem. A lot of stocks (thankfully, not many of ours) are stumbling here, and the stumble could turn into a nasty tumble before the summer is out—especially if the economic slowdown in China starts to take a deeper toll on U.S. multinational companies.
However, it will take time for these issues to sort themselves out. Meanwhile, patience and discipline will serve you well. Spread your buying out and, as I never tire of saying, “let the market come to you.”
I see no rush, for example, to buy Coke at today’s price.
Instead, I suggest keeping an eye on another name that could shift into an attractive buying range sooner. I’m referring to Toyota Motors (TM), the world’s largest automaker.
Toyota has made the news lately for yet another giant recall incident, this time affecting 6.4 million vehicles. That headline has certainly hurt the stock, as has the broad pullback in the Tokyo stock market after its unsustainable 2013 surge.
But Toyota isn’t going out of business—far from it. In fact, I expect the company to post record FY14 earnings a few weeks from now. At only 1.2 times book value (the most stable measure of an auto company’s worth), versus 2.6X at the peak in 2007, TM looks cheap.
If TM triggers a buy signal, I’ll simultaneously swap out of Freeport McMoran Copper & Gold (FCX). I’m willing to hold FCX for a long-term recovery in metals prices, but I see more upside potential in the next year—and less downside risk—with Toyota.