Bruised Toyota brand may make stock a bargain

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By Shawn Langlois, MarketWatch

SAN FRANCISCO (MarketWatch) -- Customers may be rethinking their allegiance to the once-vaunted Toyota brand these days, but not all investors have been swayed by reports of bloodthirsty hybrids wreaking havoc across America.

That's not to say Toyota Motor Corp. /quotes/comstock/13*!tm/quotes/nls/tm (TM 70.23, +0.26, +0.37%) shares haven't paid the price. The stock has lost almost 10% since the beginning of the year, trimming its advance in the past 52 weeks down to about 27%. (Not all that bad considering the headlines.)

Still, over the same period of time, Ford Motor Co. /quotes/comstock/13*!f/quotes/nls/f (F 12.77, -0.20, -1.54%) has surged almost 600%, Nissan Motors /quotes/comstock/11i!nsan.y (NSANY 15.17, -0.83, -5.19%) has more than doubled and Honda Motor Co. /quotes/comstock/13*!hmc/quotes/nls/hmc (HMC 31.77, +0.77, +2.48%) has jumped 65%.

Just about every automaker not named Toyota has been rolling along the road to recovery, as sales have started to take a turn for the better.

Therein lies the opportunity.

Buying high-quality names in distressed times is the best way to capitalize on a sector recovery, according to Tim Ghriskey, the Solaris Asset Management chief investment officer who just last month bought almost 56,000 shares of Toyota at about $80 each.

Despite the recent missteps, damning testimonies and brutal headlines, Ghriskey said he believes Toyota is that high-quality name.

Even though the stock is trading at $76, Ghriskey is willing to let his position, which accounts for more than 2% of the holdings, ride for a while.

"If this situation finally does normalize, there is some significant upside here for Toyota, and we want to be part of that," he said. "Patience is something we talk about all the time, but we need to have a degree of impatience as well."

Aside from what he sees as an imminent turnaround in the auto industry, Ghriskey also used history as a guide in making his decision.

"We got interested in Toyota based on how other companies have reacted to these type of situations in the past," he commented, pointing specifically to Ford and how it prospered after grappling with exploding Pintos, fiery cruise-control switches and defective tires.

Of course, watching his position erode hasn't been easy, especially when reports of more runaway Prius vehicles ripple across Wall Street. See full story.

"In retrospect, we probably should have given it a little more time. Every time we think it's over, something else happens," Ghriskey said. "Maybe when some idiot gets exposed for faking an accident to make money on a lawsuit, it'll finally go away."

While Toyota has all the allure needed to attract bottom feeders, it's still fraught with potential peril. GimmeCredit fixed-income analyst Craig Hutson warned investors on Tuesday that there could be many twists and turns yet to come.

"We are still in the early stages of how this entire saga will play out for the world's largest automaker," he said.

Shawn Langlois is a reporter for MarketWatch in San Francisco.