Tata Motors (TTM)
Tata Motors (TTM) makes both passenger and commercial vehicles–mostly in India. They have a broad product line ranging all the way from light passenger vehicles to heavy dump trucks and multi-axled vehicles.
Through a subsidiary they also produce construction equipment, machine tools, gearboxes and axles for commercial vehicles. Tata is also involved in automotive retailing and financing, and their exports to Europe, Africa, and Asia are growing.
What is so compelling about Tata? Well, we can start with a yield of over 8% as I write this, and a PE of only 4.35. Now you may be mentally running for the exits at this point. After all, a PE of under 5? Well, it’s pretty clear that there are at least a couple of reasons for that.
First, of course, is a worldwide recession. Stock prices have dropped across sectors and borders, and that weighs on the PE of every stock. Second, as a BRIC nation (or any emerging market) we have to expect that we might normally find lower PE ratios than in a more developed country.
On the other hand, that second reason might make a more compelling BUY argument. BRICs are widely believed to be where the major growth will be for at least the first half of this century. Whether you buy for the growing domestic market or the competitive advantage in terms of wages that India enjoys compared to the developed world, it seems reasonable to expect very favorable results in the mid to long-term.
I don’t have the nerve for individual stocks in emerging markets, but I do own Tata via an emerging markets fund. I sometimes wonder if I’ll regret that caution 15 years from now. What do you think?