Friday, February 5, 2010

Buy a Toyota?

As a proud contrarian, if I were in the market for a new car, and didn't need to use the car immediately, I'd be all over a super cut-rate Toyota right now.

Yes, it's possible (though by no means certain) that Toyota has perpetrated an evil coverup, but it's way too spotlit right now for the matter to reach any resolution other than a full, free, assured fix (assuming the current recall doesn't turn out to implement a complete solution). And, in the meantime, there are measures one can take to mitigate the danger in the exceedingly rare event the problem cuts in (e.g. simply disengage the cruise control!). Toyota won't risk wrongful death lawsuits with the whole world staring at them, and neither are eight million cars going straight to junkyards. It will be resolved.

And while the acceleration problem sounds fearsome, it doesn't make these vehicles out and out turkeys. They're still great cars, with a possible problem in one aspect of one system. It should have been fixed sooner. But they're on it. So, sooner rather than later, that problem will have an assured fix (if the current fix proves insufficient). So why not scoop up a bargain?

I'd even consider buying stock. Without understating the seriousness of the branding hit Toyota's suffered, or the swelling fortunes of its competitors, the market may well have overreacted (TM is down more than 20%), as it often does in the thick of big fear-inducing stories.

On the other hand, here's a different viewpoint from Forbes Magazine: "Toyota's Troubles Are Just Beginning". I suspect that much of the negativity in that article is already priced in to Toyota's stock, though. And the key to investing - elementary, though a surprising number of people don't realize it - is that it's not about assessing how a company will fare, but in assessing how wrong everyone else is about how the company will fare!

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