Toyota set to rebound, investor says

Toyota's earnings are reviving, and the car company will get a boost once it puts its recall problems in the past.

By TheStreet Staff Apr 28, 2010 9:55AM

Car wheel © Brand X / SuperStockBy Gregg Greenburg, TheStreetTheStreet


Toyota (TM) will put its car-recall issues behind it and lead the auto industry as competition with Ford (F) heats up, according to Shuhei Abe, manager of the Hennessy Select SPARX Japan Fund (SPXJX).


Abe also said Japan's economy will accelerate and corporate earnings are getting a big boost as its politicians come under pressure to produce growth.


The mutual fund returned 7.1% in the first quarter, trailing the MSCI Japan Index's 8.3% gain. The Hennessy Select SPARX Japan Fund outperformed the benchmark index in four of the past six calendar years, including 2008 and 2009. Abe recently discussed his investment strategies with TheStreet.


What is the state of the Japanese economy?


Abe: The Japanese economy has really suffered. I am not seeing strong signs of a recovery yet, but it is becoming a very important issue for the new government. The government faces an election in July so there are lots of measures to accelerate the recovery for the next few years.


How are Japanese banks faring?


Abe: Japanese banks have been damaged the least among their global competitors, but they have probably been the least aggressive in terms of growing in the domestic market. I would not bet on Japanese major banks for their future growth but at least they are stable.


Find a new broker and start trading


The yen has strengthened versus the dollar over the past year. Can Japan thrive with the yen below 100?


Abe: Absolutely. Japanese companies have already budgeted at the yen level of 90. Even with that, the general market street estimates for the coming fiscal year ending in March 2011 say that earnings will grow by more than 50%. And estimates further say that in the year ending March 2012, earnings can grow 20% to 25% with the yen at the 90 level. So if the yen goes back up to 100, the growth of Japanese companies in general will be quite impressive. I would say they can handle the yen below 100. Whether they are happy about it is another story.


Has Japan learned to live with China as the major exporter from the region?


Abe: Most certainly. It is probably one of the biggest things that has happened over the past couple of years. Japan established "Japan Inc." after World War II, with Japan being the sole exporter, or "factory" for the U.S. The U.S. market was the only market it served. But in the past three to four years, that has completely changed, particularly after this crisis. China, including Hong Kong, has become the major customer for Japanese companies. Originally that trend started with capital goods to build the factories, but now it is more for consumer goods.


How are car-recall issues at Toyota reverberating in Japan?


Abe: Japanese people deep in their hearts are sympathetic. Yet, Toyota had to correct many things. They really created a dynasty that has been successful for such a long time. They have to reflect about what went wrong. That said, the things that they did wrong were really far less than the things they did well. So I am a strong believer that Toyota will revive. As a matter of fact, their base earnings are clearly reviving at a yen level of 90, according to what the company announced. So once they get over these problems in an honest and a clear manner, I am sure Toyota will be the one to lead the auto industry.


Related Articles


Auto industry stocks: manufacturers and retailers


Dow drops 213 points on Europe debt fears


Ford: commodities won't hurt profit



Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
262 rated 2
480 rated 3
651 rated 4
649 rated 5
629 rated 6
616 rated 7
496 rated 8
346 rated 9
111 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.