Riding in Toyota Today
By Paul Price of Market Shadows
Market Shadows Virtual Value Portfolio put most of our remaining cash reserves to work this morning in buying 38 ADRs (American Depository Receipts) of Toyota Motor Company (TM) the world’s largest seller of automobiles and trucks. We like and already own shares of Honda (HMC) as well.
The stock was down overnight due to negative action in the Japanese marketplace so we got a great entry price of just $106.57 per ADR today.
Toyota’s 52-week range has been $103.38 – $134.94. Fiscal year 2013 (ended Mar. 31, 2014) is expected to have come in at about $12.00 per ADR putting TM’s trailing multiple at just 8.9x. Its yield fluctuates with currency translations but is projected at around 2.25%.
Market Shadows' Virtual Put Writing Portfolio used today’s weak opening to short one contract of TM’s Jan. 2016, $120 put @ $22.67 per share.
We must now stand ready to buy an additional 100 shares of TM at a net cost, if exercised, of $97.33 ($120 strike price – $22.67 put premium.)
Our maximum gain on this put sale would be keeping the $2,267 received without having to buy any more shares. That will occur if TM rises to $120 or higher and remains there through the Jan. 15, 2016, expiration date.
Toyota has a solid balance sheet and expects to come to the American market next year with their first commercially available fuel-cell technology electric vehicles. During three years of road testing these cars have been getting about 300 miles on a charge. Unlike Teslas, Volts and Leaf electric vehicles Toyota’s fuel-cell vehicles can be recharged in just three minutes.
Owning TM today is a great value play with a free perpetual call on this new technology working out profitably.
Disclosure: I bought shares of TM and HMC in my personal accounts. I am short TM and HMC puts in my own accounts also.
