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.
Published or updated October 25, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke, also known as Flexo, has contributed to PC World Magazine, US News, Forbes, and other publications. 
{ 4 comments… read them below or add one }
Nice disclosure.
It’s always nice to see someone willing to disclose actions that have not worked out as they hoped. It’s easy to say when you predicted something and were right. Declaring a prediction after it has come true (what I like to call a postdiction) is about as impressive as walking, yet many love to do it.
Well thankfully my Acura model isn’t affected. Plus, I always use Honda oil for changes. Still seems a bit scary though.
This is not engine oil, its brake fluid.
Do a lot of people buy “discounted” stocks after recalls or bad PR events of companies?