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Part I: Investing in Electric/Hybrid Car Stocks – Toyota (TM)

After several months of planning, designing and debugging Green Energy Trends, I’m happy to be writing the inaugural post for the investing section. I’ll be covering the latest trends in not only electric and hybrid cars, which I feel are on the verge of exploding in the popularity over the next couple of years, but other green energy themes such as wind, solar, biofuels, marine turbines and more… all of which are so critical to decreasing our dependence on foreign oil and restoring the health of our environment.

As founder of SelfInvestors.com my expertise lies in discovering emerging growth companies and providing insight into investing in these companies based on sound fundamental & technical analysis. With my new project here at GET, I look forward to focusing on the green side of things : ) Hope you enjoy my research!

Part I: Electric/Hybrid Cars: Toyota Prius

demand for hybrids.gifElectric, hybrid, plugin electric hybrid.. whatever you want to call them, variations of hybrid and electric cars have been gaining rapid popularity with the commercial success of the Toyota Prius along with skyrocketing fuel prices.  In part I of this report I’m going to focus on Toyota Motors (TM).  In future reports, I’ll take a look at Honda Motors (HMC), smaller, over the counter companies like Zap as well those companies that stand to benefit by being parts suppliers.  Please be advised that these reports aren’t meant to be 100% comprehensive.  My hope is that I provide a framework for the big ideas with knowledgeable commenters filling in any gaps.

We are clearly just in the beginning stages of the green car movement, with early models offering a gas/electric mix of power with no external charging needed.  These kinds of models get good gas mileage at around 40mpg, but that isn’t exactly exceptional.  What we’ll begin to see over the next few years are plugin hybrids that offer much greater gas mileage with perhaps decreased performance from a vareity of manufacturers as the big US automakers finally wake up and realize what consumers want (see Chevy Volt)

First Mover Advantage

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Toyota was the first to produce a commercially viable hybrid car and to this day it’s the most popular hybrid model available with the Prius waiting list still anywhere from a month to two months in many places.  The car was first made available in Japan all the way back in 1997 and first introduced to the US in 2001.  Talk about impeccable timing on Toyota’s part.  The war in Iraqtoyota_prius_hybrid.jpghad yet to begin and the price of gas was well below $2/barrel at around 1.70.  With gas prices skyrocketing the green movement catching fire, the company has sold more than one million of the hybrids and plans to sell a million a year beginning in 2010.  In 2007, the sales of the Prius nearly doubled over 2006 with a 70% increase in sales.

What’s next on the horizon for Toyota?  The company plans to introduce two new hybrids at the 2009 Detroit Auto Show, one a completely new Toyota, the other a Lexus.  It also plans to introduce the 3rd generation Prius in 2009.  Later this year the company plans to introduce its stop-start technology to its gasoline engines which provides 10%  greater fuel efficiency than its current hybrid engines.  Further out, the company expects to provide the first plugin hybrid using lithium ion battery technology, but in limited quantities sometime in 2010.

What does Toyota look as an investment?  For starters, Toyota (ticker TM) is certainly one of the safest ways to play the green car boom.  It’s a big blue chip type stock with a fantastic brand name and in a time when most major automakers are on the verge of going under, Toyota continues to thrive.  In fact, the company has posted profit growth in every single year this decade.. truly amazing for auto manufacturer that is currently doing close to 200 billion in sales a year.  However, there are problems that have come up recently.  In it’s most recent earnings report, the company reported a decline in growth over the year ago quarter and expects growth to be off 30% in fiscal 08, significantly worse than the company or analysts expected.  The company attributes the disappointing projections to an increasingly strong Yen, a slowing US economy and rising raw materials and the company will undoubtedly face increasing competition in the hybrid/electric car market.   On the bright side, the company is making significant inroads into emerging markets, specifically China where it expects to offset any weakness in the US.

In terms of strategy, I base my buy and sell decisions on simple supply and demand which is revealed in the charts through price and volume.  Taking a look at Toyota reveals the stock is off nearly 40% over the past year and a half and is still mired in a long downtrend.  Here’s the key: the stock market looks about 6 months ahead.  Much of the negative outlook has been priced in over the past year, so if you think Toyota still has a bright future, now might be a good time to watch close for an entry.  It’s still in a basing pattern and could bounce around between support at 95 and resistance around 105 before emerging from this downtrend in a couple months.

For more on Toyota Motors, check out WikiInvest

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Disclaimer: No stock analysis here at GreenEnergyTrends.com is a recommendation to buy or sell.   Please do your own research.  I currently own no position in Toyota Motors (TM)

In Part II to be posted in a couple days, I’ll take a look at the other big player in the hybrid market right now, Honda Motors.

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