Investing Blog

If there is anything I’ve learned after years of trading the markets for myself its that you buy a company when its down. Toyota seems like the perfect name, having a strong history of quality cars despite recent problems with its accelerators and now brake problems with the Prius line. However, all this will soon pass and investors will be richer for it.

Toyota Recalls

Toyota’s recalls weren’t particularly damaging considering the parts in question. Accelerator problems apparently stem from a faulty floor mat, which suggests that the gas pedal was getting stuck underneath the mat causing an undesired increase in speed. When you look at it, though, floor mats are 1) inexpensive to replace and 2) not critical elements of the car itself. Thus, I firmly believe this too will pass and Toyota’s name will be largely untouched.

Prius Brakes

Unfortunately the Prius brake problems are still fresh and it is not yet known what it will take to fix the matter. At the time of writing, it appears that the brakes only affect 300,000 cars, most of which were sold in Japan. The good news is that these cars won’t come under the jurisdiction of bloodsucking US regulators and 300,000 is a very small amount of production for a company the size of Toyota. However, it should be stated that we do not yet know the full extent of the problem. (Such is investing, right?)

A Favorable Trend

No, not the recalls. Technically, Toyota’s stock looks strong at any price above $70 per share where one of its strongest support trends rests. This trend has held the stock price higher several times dating back to April of 2009. Toyota’s first quarter earnings are sure to be ugly, as everyone would expect, mostly due to the fact that the bad publicity stiffed US sales. However, at this price, and with a company of this caliber, I’m carefully considering the purchase of several lots of OTM call options at the $75 strike price. April $75 strike price calls at $3.70 look like a healthy bet.

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