NEW YORK (TheStreet) -- Dr. Robert Shiller's acceptance speech for the Nobel Prize in economics focused on "speculative asset prices." From the podium in Stockholm, Shiller's remarks touched on how the market is influenced more by investor psychology than economic fundamentals. For investors, that means stocks can be beaten down for reasons having nothing to do with the long-term business outlook for the company.
Toyota is the world's biggest automaker by sales and production. General Motors is the number-one car seller in China, which lifted its sales by 2% in the first quarter. But due to scandals that it no way threaten the overall viability of either company, both are down for the last month, quarter, and six months of market action. Since the first of the year, General Motors has fallen by more than 16% with Toyota dropping over 11%.
For long-term investors, that is a buying opportunity for both stocks.Back in late December 2013, TheStreet ran a series on "Least Favored in 2013." I wrote about Caterpillar (CAT), the largest heavy equipment maker in the world. Caterpillar was battered by the traders last year due to writing off the $580 million cost of a Chinese company that proved to be a fraud. About Caterpillar, then trading under $87 a share, I recommended that, "Investors with a long-term horizon should consider buying on the dips to accumulate a position at a discount." Caterpillar closed today at $102.83, up about 20% over a period when the Dow Jones Industrial Average has been pretty much flat. Both Toyota and General Motors have the same potential to reward investors. For value investors, both are selling at substantial discounts with solid profit margins for the car industry. The price-to-sales ratio for General Motors is 0.34. For Toyota Motor, it is 0.76. The market is discounting each dollar of sales by a significant margin. By contrast, Tesla Motors (TSLA), which loses money, has a price-to-sales ratio of 12.18. Tesla does not pay a dividend, either. General Motors has a dividend yield of 3.53%. The dividend yield for Toyota is 2.18%. Both of those top the average dividend for a member of the Standard & Poor's 500 Index (SPY) of under 2%. Growth investors should also be pleased by the trends. Over the last five years, earnings-per-share growth was down by 10.9% for Toyota. The Wall Street analyst community consensus is that is will rise by 33.7% over the next five years. It is the same for General Motors, which had earnings-per-share growth of a 0.9% for the last half decade. For the next five years, it is projected to come in at 18.7%. For growth, value and income investors, the short term pains of General Motors and Toyota Motor should lead to a very healthy total return over the long haul. At the time of publication, the author held no positions in any of the stocks mentioned. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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