Best of Japan’s Big Three
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
JOHNSON FAMILY INTERNATIONAL VALUE FUND
COMPANY: Nissan Motors
TICKER: NSANY (NasdaqSC)
52-WEEK RANGE: $19.30-$27.70
MARKET CAPITALIZATION: $52 billion
Peggy McKay co-manages the Johnson Family International Value Fund, a long-term capital appreciation fund that invests in companies located outside America that have good relative value. She spoke with Katharine Herrup of The New York Sun about why Nissan is the best among Japan’s top three car companies.
Why do you like the stock?
We’re a value manager fund, and we like Nissan because it’s very attractively valued. You got Nissan Motors trading about 11 times earnings and 5 times cash flow. They’ve been under pressure a little bit because energy and commodity pressures have been so high, but relative to other carmakers, they’ve held pretty high. Nissan makes the most profit for vehicle.
Do you think Nissan will be a strong company going forward?
They are expecting a seventh straight year of record profit. They are coming out with nine new models in the U.S. market alone. The trend for their share of the U.S. market is going in the right direction. We expect most of the growth to happen in the second half in the year.
What about the company’s growth prospects?
Their growth prospects look solid with the introduction of the new models on top of which the American consumer is switching to the smaller Japanese cars. Nissan is also expanding into China and getting phenomenal growth there.
Who are the other big two car companies in Japan?
Toyota and Honda are Nissan’s biggest competitors in Japan. They’re all doing quite well, we just prefer Nissan at this point because they’re profitable. As a stock, Nissan is more attractive. They make very reliable cars, middle-range cars.
What are Nissan’s top markets?
It has 6.3% share of the total U.S. market. Their largest market is Japan, and their fastest growing is market is in China, and they are building a new factory in Russia.
How do you expect the industry to perform in light of high oil prices?
I think U.S. consumers are a little overstretched right now. Perhaps they might reign in some of their car purchases since prices are rising at the pump and since mortgage rates are rising.
Japanese companies have an edge though because they are continuing to gain market share as Ford and GM are struggling. Japanese companies make better cars – they spend the money to improve the efficiency of the cars they are making. They really pay attention to how they are producing the cars. That attention to cost will keep profit up.
What’s driving growth forward?
Just the quality of their product and the efficiency of their company. Japanese car companies are not struggling with these legacy issues that American car companies have. Nissan doesn’t face the same issues with pension and health care obligations. They aren’t unionized. In terms of quality and reliability, the Japanese three have a better edge and stronger sales group.
Is it a good time to buy?
I think so, not as good a time as a couple of months ago.
What are the risks?
It’s a fairly safe investment, but the U.S. consumer is weaker so that might play out through perhaps slower growth.