RLAM’s Varley maintains Toyota overweight

Royal London’s David Varley is maintaining his fund’s overweight in Toyota Motor Corp.

The £249m Japan Growth trust manager believes the stock cannot fall much further, but has large upside potential. Toyota fell 19.24% to ¥3,315 from 22 January to 5 February, following the news of a $2bn product recall.

Before Toyota announced the recall, Varley's stake had a 6.5% weighting, compared to a benchmark position of 5.25%.

"Toyota is now very cheap versus its sector and versus its main competitor Honda. It is trading at a price-to-book of 1x compared to Honda on 1.4x," he says.

"If Toyota handles the reputational issues well, the stock could perform strongly. It cannot go down too much, but it can go up a lot.

However, he is not planning to increase his holding because of the existing overweight.