by Paul Goodwin, editor The Cabot China & Emerging Markets Report
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The Cabot China-Timer has flashed a new buy signal, telling us the trend of Chinese and emerging market stocks has turned back up. No one knows how long this signal will persist, and you shouldn’t try to guess. Instead, your best move is to go with the evidence, which is now bullish.
India’s Tata Motors (NYSE: TTM), the largest truck and auto maker in the sub-continent, has been a little of both over the years, but it looks like the time is right for a new advance.
Chart: MarketClub.com
[AA] Incidentally, MarketClub flashed a weekly and daily 'trade triangle' at $15.99 and $15.55 respectively on 2/26, and confirms TTM is in a '(+100) strong uptrend.' MarketClub's monthly trade triangle flashed when TTM was trading at $5.41, on last April 2.[AA]
Tata Motors is run by Ratan Tata, the great-grandson of Jamsedji Tata, who founded the Tata family empire. Ratan Tata is now the Chairman of Tata Group, which includes companies in steel, power, consulting, chemicals, hotels and telecom services.
Tata Motors was founded in 1945 as a manufacturer of locomotives, but made its reputation in manufacturing trucks and buses; it’s the fourth-largest truck manufacturer in the world and the second-largest bus manufacturer.
The company has been aggressive in pursuing growth, buying Daewoo’s truck division in 2004 and taking over the Jaguar and Land Rover brands from Ford in 2008. In 2009, the company acquired Hispano Carrocera, a Spanish bus and coach body manufacturer.
But the product that has kept Tata Motors on investors’ minds for years has been its commitment to the Tata Nano, a fully enclosed, four-door, four-passenger car that is touted as “the least expensive production car in the world.”
Tata’s commitment was to sell the car for 100,000 rupees (or one lakh rupees), which amounted to about $2,000 at the time of the announcement. The Nano actually arrived for sale on March 23, 2009.
The Nano gets about 61 miles per gallon on the highway and 52 MPG in the city from its two-cylinder engine and has a top speed of about 65 MPH. It is now in wide distribution throughout India, and is scheduled for export to Africa and Europe as regulatory guidelines are met. A hybrid version is reportedly in development along with a fully electric model.
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The Nano is crucial for Tata Motors because its low price puts the car within reach of an enormous number of potential owners in India. But it’s not the whole ball game. Tata had annualized sales of $16.4 billion in 2009, and its businesses include engineering and construction fi rms, auto fi nancing, supply chain management and electronics and plastics manufacturing.
Tata Motors’ takeover bid for Jaguar Land Rover was a drag on the company’s finances for months, requiring a bridge loan to complete. But the financing came together in late February and the deal was fi nalized. Some analysts are worried about the repayment schedule for these loans, but the company’s greatQ4 earnings news showed a rebound in Jaguar Land Rover sales and Tata’s highest-ever one-month car sales in February.
Sales grew 23% in 2008 and 66% in 2009, although the Jaguar Land Rover takeover supplied a substantial chunk of that 2009 increase. The prospects for future sales depend heavily on the health of the global economy, but investors are clearly betting that the recovery will continue.
Learn more about this financial newsletter at Paul Goodwin's The Cabot China & Emerging Markets Report.
