Today’s recommendation is a timely bargain. After riding the rally for eight weeks,Honda Motor Co. Ltd. (HMC) began pulling back on Friday. On the third day of the pullback yesterday, Ian Wyatt, editor of Top Stock Insights, advised his subscribers to take advantage of HMC’s lower prices to establish a position in this giant of the Asian auto industry:
“China and India are the world’s most important developing countries. With the world’s second-largest GDP, it may seem improper to call China emerging, yet they continue to grow at a fast rate. Also, China and India represent more than 35% of the world’s population. Whether they are emerging or not, they’re important members of the global economy.
“Income levels and wage growth should play a big role in the future of the Indian and Chinese economies. After all, they cannot remain export-driven nations forever. Eventually, they will begin to rely on domestic consumption as their economies mature (remember that 70% of GDP in the U.S. is consumer spending).
“The future increase in incomes will have a huge impact on many sectors in China and India, with the automotive industry being a primary beneficiary. Car ownership in the U.S. grew as wages and incomes expanded. Much as we saw in the U.S. earlier last century, China and India will experience a similar path.
“While many opportunities will arise because of the automotive boom in emerging Asia, we will focus on two for the Top Stock Insights portfolio: automakers and auto parts makers. Each industry will benefit from the global growth in the automotive sector, but these two companies differ tremendously.
“I will have the full reports out next week, but we can buy Honda Motor Co. Ltd. (HMC) on today’s weakness. ... Honda is the sixth-largest automobile manufacturer in the world. Additionally, the automotive company has been the world’s largest motorcycle producer since 1959. Honda is also the world’s largest manufacturer of internal combustion engines measured by volume, and produces more than 14 million internal combustion engines each year.
“Honda was also a pioneer in automobile marketing. Management developed vehicles to cater to different worldwide markets. Unlike the Model T Ford, Honda manufactures different makes and models based on tastes specific to a certain region. With such a long and distinguished history, it’s hard to believe that Honda has fallen from grace. Honda’s business has been crippled after the tsunami in early 2011 and by a rising yen for most of last year.
“Thomas Fuller in 1650 may have phrased it best, ‘The darkest hour is just before the dawn.’ While the past year has been volatile, Honda survived. There is also reason to believe that the troubles of the past are behind Honda and the company stares ahead at a bright future.”
- Ian Wyatt, Top Stock Insights, March 6, 2012