Japanese Auto Makers Very Attractive for Investors

Washington DC October 31, 2005; The AIADA newsletter reported that as mounting pressures continue to impede the profitability of domestic automakers, the three major Japanese automakers are investing in plants all over the U.S.

Japan automakers Toyota, Honda, and Nissan earn between 60 and 70 percent of their operating profit from North America, making them a solid alternative for investors looking to throw their money into the auto industry, reports The Wall Street Journal.

"U.S. auto companies have now begun a major restructuring of operations that will reduce capacity significantly," says John Vail, a strategist at J.P. Morgan Securities in Tokyo, who believes stocks in the Japanese auto industry, as a whole, have room to gain 20 percent before the end of 2006.

"Much of this market share will be gained by Japanese producers." According to Zacks Investment Research, shares in Toyota now trade at 14 times earnings projections for the current fiscal year. Honda’s shares are roughly 11 times the current year’s projected earnings.

Another selling point to Japanese automakers for investors is the profit margins. "The most competitive market in the world today is the U.S.," said Nissan CEO Carlos Ghosn. But "the big difference is that Nissan is facing that competition with 9.2 percent operating margins (the largest in the industry)."