Should You Own Toyota?

With new cases of the coronavirus spiking in the US and worldwide .

With the already historic unemployment levels and job losses in recent months .

With massive uncertainty in hospitalsbanks, and other industries.

And with many Blue Chip stocks looking vulnerable when they’re supposed to be among the best areas to invest your capital.

There are few safe places to invest today. And this number grows smaller every day this crisis lasts.

The key to continue compounding your investments and build wealth is to keep investing well over time.

But another huge part of this that few think of is also losing as little capital as possible.

The fewer investment losses you have the more capital you keep. And the more capital you keep the faster you achieve your retirement goals.

In recent articles I’ve shown you several stocks to avoid investing in…

Today I want to show you another stock to avoid so you can grow your investment portfolio safely.

2 Reasons To Avoid Toyota

  1. It’s Got An Enormous Amount of Debt

As of this writing Toyota (TM) is a $182.9 billion market cap vehicle manufacturer and seller. And its got a lot of debt.

Its most recent quarterly data showed it has $83.2 billion in cash.  While it has $228 billion in short term and long-term debt and capital leases.

This means its debt is 125% of its market cap.

Having debt levels this high is rare so let me show you what this really means…

It has more debt than book value on its balance sheet.

Meaning, its got more debt than the entire balance sheet is worth.  When this happens, it means when you subtract total liabilities from total assets there’s a negative number left over.

This leaves you with a negative shareholders equity number… And this is a conservative estimate of the value of Toyota shares.

When this is negative it means that based on the balance sheet Toyota’s shares are worth less than zero.

This isn’t exactly true in a real-world sense because this doesn’t include Toyota’s operations, but it’s still horrible.

It has so much debt that it’s the 4th most indebted company on Earth.

We’ve already shown you several vehicle stocks to avoid during this crisis.

To see those articles and learn why the coronavirus has massive negative effects on the car industry use the links below.

This large debt makes Toyota stock enormously risky by itself… Combine this with the negative effects the coronavirus is having on the car industry and it makes things worse.

2. Uncertainty Related To The Coronavirus

Air travel, hotels, and restaurants are still getting hammered.

But so are many other industries worldwide.  And car manufacturing and selling is one of those.

Car sales have now fallen drastically nationwide in the 1st two quarters of 2020 as this pandemic began raging.

  • Sales fell 12.7% in the 1st quarter of 2020 compared to the 1st quarter of 2019.
  • And 34.3% in the 2nd quarter in the year to year period.

This is industry wide.

On August 6th, 2020 Toyota released its latest quarterly earnings report and they were a horror show.

  • Vehicle sales fell 50% to 1.16 million total vehicles sold.
  • Operating profits fell 98% in the year to year period.
  • Net profit fell 74.3% in the year to year period.
  • And Toyota said it expects its full year net profit to fall by 64%.

This isn’t just bad… Its catastrophic.

Vehicle manufacturers, sellers, and dealerships operate on super small margins in good times due to the enormous amount of competition.

In tough times like we’re dealing with now; these far lower sales lead the entire industry toward unprofitability.

And unprofitability combined with ultra-high debt levels are a recipe for disaster.

For the reasons above – and the ones in the other vehicle articles I’ve written – I recommend you stay far away from this entire industry.  Toyota included.

Click the links below to see other stocks we recommend to Depression Proof Your Portfolio and earn safe investment returns.

Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.

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