Toyota Motor Corporation (ADR) (TM), General Motors Company (GM): Kingdon Is Finding Alpha in the Japanese Kingdom

Autos accounted for nearly 80% of Honda Motor Co Ltd (ADR) (NYSE:HMC)’s fiscal 2012 sales, while motorcycles were 13.5%. The company’s production operations are conducted primarily in 30 separate factories, four of which are located in Japan. Even still, during fiscal 2013, nearly 70% of sales were from outside Japan.

Competition abroad

General Motors Company (NYSE:GM) still has the government bailout and bankruptcy filing overhang, but I believe the company is now a turnaround story. GM has been shrinking its North American production, while focusing on on fewer brands. The company is turning to the emerging markets for future growth. China and India, the world’s two most populous countries, are the keys. It plans to invest $11 billion in the countries by 2016.

For China, General Motors Company (NYSE:GM) plans to build four new plants in the country; this should help boost annual production to 5 million vehicles and triple exports from Chinese plants. Its bankruptcy allowed the company to shed billions of dollars in liabilities. General Motors Company (NYSE:GM) has strengthened its balance sheet since its bankruptcy, now having over $20.5 billion in cash as of 1Q, compared to total debt of $18.4 billion. This cash balance was boosted by the 1Q 2013 free cash flow of $1.4 billion generated in 1Q, compared to the $280 million in the same quarter last year.

Bottom line

It’s hard to disagree with Kingdon when you consider that Toyota is trading at a forward P/E ratio that’s 11.7 times — this is below Honda’s 13 times. Toyota Motor Corporation (ADR) (NYSE:TM) appears to be a leader and it’s breaking into the emerging markets. Meanwhile, General Motors Company (NYSE:GM) is also an interesting investment choice. The automaker trades at only 8.3 times forward earnings and is still very much a turnaround story.

The article Kingdon Is Finding Alpha in the Japanese Kingdom originally appeared on Fool.com and is written by Marshall Hargrave.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends General Motors. Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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