Is it safe to buy Toyota stock?

NEW YORK (CNNMoney.com) -- Toyota may finally have a fix for the sticking gas pedal problem that led to a massive recall of many of its popular vehicles.

But it remains to be seen what the long-term damage to the business will be, and it's been a rough week and a half for Toyota investors: Shares of Toyota's U.S.-listed stock (TM) have fallen nearly 15% since the the problems were first revealed on Jan. 21.

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Shares of Toyota surged in 2009 as auto sales appeared to hit bottom. But the company's recall woes have the stock reeling so far in 2010.

At the very least, there was likely a drop in sales in January because several key models were pulled from the market last week. And rivals such as Ford (F, Fortune 500), GM, Chrysler and Hyundai are trying to take advantage of Toyota's woes with trade-in incentives to Toyota owners.

Still, investors seemed happy with Monday's announcement of the pedal fix, bidding shares up 3.5% in early trading.

But is now really the right time to buy Toyota shares? Bob Bacarella, manager of the Monetta Fund, is not sure.

Bacarella said that he no longer owns the stock, having sold his position a few months ago to cash in on the stock's big gain last year. He said that he's keeping a close eye on the stock now that it has taken a sizeable hit. But he's not ready to buy more just yet.

"You have to wait to see how this unravels. How many people were affected by this problem but didn't know or report anything?" Bacarella said. "You have this potential legal liability that hangs over the company. I would not be a buyer today."

To that end, a Corpus Christi, Texas-based law firm filed a class-action lawsuit on Monday on behalf of a driver who claims that he was involved in an accident after his 2008 Toyota Avalon accelerated through a stop sign.

Customers may not be the only ones with a legal gripe. A law firm in Dallas announced Monday that it was looking into whether there were securities law violations resulting from how the company handled the disclosure of its gas pedal problems.

Timothy Ghriskey, senior portfolio manager with Solaris Asset Management, an investment firm in New York that owns shares of Toyota, said that he hoped the recall and any potential legal settlement is just a one-time issue for the company.

But he said he is concerned that the perception of Toyota as a quality automaker could be something that takes a long-term hit -- especially as cars from Ford and GM start to develop a better reputation.

"There are options for car buyers other than Toyota. Buyers can afford to be fickle and change their mind since the quality gap has narrowed," Ghriskey said. "And in terms of U.S. sales, there could be a 'buy American' feeling or attitude developing among consumers."

Ghriskey said he hasn't yet decided about what to do with the firm's holding in Toyota. But he hasn't bought more in the past week, despite the drop.

Toyota's U.S. stock was trading at about $79.50 a share late Monday morning, down from more than $90 a little more than a week ago. Bacarella suggested that some think $65 might be the best price to start buying Toyota again.

If competitors are really able to steal away customers who would have otherwise been happy buyers of Corollas, Tundras and Camrys, then this might be just the start of bigger problems ahead.

But it's uncertain if Toyota will fall that much further. It hasn't traded as low as $65 since the overall market was nearing its bottom last March.

Tom Forester, manager of the Forester Discovery Fund, thinks the stock's drop was an overreaction. His fund owns shares of Toyota. He said he is not looking to add more just yet but that if he hadn't owned any of the stock, he would be buying now.

"Is it a headache? Sure. But it seems to be more of a temporary blip. It's not like Toyota does this year-in, year out," he said. "We're going to hold on. What happens is you get some big holders that get out at the sign of any problem. It's still a buy."

If that's the case, current shareholders that stick this out could be singing the old ad jingle "I Love What You do For Me, Toyota" once this crisis passes.

-- The opinions expressed in this commentary are solely those of Paul R. La Monica.