Honda just announced a major car recall due to faulty brake systems. The company is concerned that owners using brands of brake fluid other than Honda’s own may experience problems resulting in a fluid leak, degrading the brake system’s performance. This affects 470,000 Odysseys and Acura RLs, made from 2005 to 2007.
A few days ago, Toyota announced a similar recall, affecting 740,000 Avalons, Highlanders, and several Lexus models.
In January, I thought I could use the band news about Toyota recalls to my investment advantage. After some recall announcements, I purchased shares at TM because I thought it would be at a discount; car manufacturers announce recalls all the time, and I thought the price after a good company’s bad news would not reflect its true value.
The investment has not paid off yet. My purchase was only 10 shares, and it was more of an experiment than an investing strategy. I was reasonably sure I wouldn’t lose all of the money, and I haven’t so far. The stock price was briefly ahead of my purchase price in March, but it hasn’t recovered since.