Toyota (TM)

Starting to see a slowdown in car sales, so he wouldn't buy any autos. Instead, own a company growing its free cash flows and has little debt. Carmakers' (and airlines') capex is through the roof and they generate little cash flow. A cyclical industry.

It is one of the strongest auto companies in the world. It is a global player. Japan is improving for them. The biggest swing factor for them is the US. The Yen strengthening has been a negative for this company.

He is about to buy another Toyota vehicle. $95 was a recent bottom and it ran up. It is right on trend here. Around $107 is the top. He expects weakness and also in other automakers.

(Top Pick Oct 18/14, Up 2.91%) It had a poor year and then started to recover. Likes the Lexus brand. The weaker Yen has improved margins dramatically for TM-N. There is still a fair amount of upside in this.

(A Top Pick Oct 17/13. Up 1.67%.) Sold his holdings in order to create some cash. He was also concerned about the rise in the US$.

(A Top Pick October 17/13. Down 13.81%.) With the recalls and the currency exchange, he exited this position.

She does not like the OEMs, but she would prefer Toyota over North American names. Also, this one is a nice play on Japan.

There is nothing wrong with this company. When you look at the numbers, they are really quite good. Very conservatively run and with great product. Their numbers were quite good in the last quarter when they came in.

Well-run company. Japanese automakers have been gaining market share at the expense of North American companies. Share price has done well, but not as well as the auto parts companies. This is a relatively cheap stock on a price-earnings basis, and this is as good a bet as any of the others.

Largest car manufacturer, by volume, globally. A cheap stock trading at 8X earnings where, before the crisis, it was trading at 12-15 times earnings. Returns are excellent relative to the competition. Clean balance sheet. Pays a dividend of 3.1%. Japan’s bond yield is at 55 basis points, so if you are a Japanese retail investor, you can earn 3% owning the shares or 55 basis points owning a government bond. The issue for him is that there is not a lot of low hanging fruit. Margins are already relatively full, and returns are nice and high relative to the competition.

Auto stocks in general have done pretty well. A large portion of that has to do with the strengthening of the yen over the last few months. Japanese motor manufacturers have had a really good past 18 months or so, partially because of the weakness of the yen through most of 2013, which is really helpful to the bottom line. Selling lots of cars and making good money. Not a bad time to be in this sector, with the proviso that if you made some money, it may be sensible to take some profits.

The outlook for Japan continues to be that it will get better. There are some very concerted efforts going on trying to stimulate and the exporters should benefit. The problem is, you are dealing with an investment in a currency that is generally weakening. Unless there is a significant shift in the direction of the currency, you could be facing some headwinds. For auto companies, he would be more likely to buy something that is more focused on North America and Europe so would prefer to buy Ford (F-N).

Is affected by overall trend in auto sales. China’s sales are consistent and higher than the Americans. #2 of the big internationals in China. He picked F-N about a year or so and hung his hat on that one. Thinks you can buy as many as you want in the sector, but he prefers F-N.

Reporting incredible earnings today. This is a name that he would be looking at.