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Jazzy33 (59.21)

In 2009: Be a HOG!!!

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January 02, 2009 – Comments (14) | RELATED TICKERS: HOG

A lot of companies have been beaten down by the economy, we all know that. But I am an eternal optimist when it comes to the American economy and its ability to come back with a vengeance. In my  opinion right now is one of the greatest, and maybe the greatest, time to buy undervalued companies in the last half a century. One company that I have recently added to my portfolio (a little disclosure there) is Harley Davidison (HOG). If there is a company that I can see being around 50 or even a 100 years from now, this is one of them. Here are the following reasons why:

1. Brand Power - Everyone knows what a Harley is and nearly everyone would love to have one.

2. Cult like following - To be a Harley owner is like joining an elite club where everyone likes everyone. It's like being a fireman but way cooler.

3. Nostalgia - Just the name Harley Davidson evokes feelings of good times and euphoria for millions of Americans.

4. Global Market - They are now selling to markets overseas. This is only a recent (past couple years) reality for HOG.

5. Value - I could give you an excel spreadsheet which shows the expected  freecash flow, NPV and ROIC, but I will just say that a price under $20 is a heck of a bargain. Think long term.....

If there has ever been a great time to be a HOG, now has got to be it. Ride on!!

14 Comments – Post Your Own

#1) On January 02, 2009 at 1:08 PM, GNUBEE (26.83) wrote:

6. Lets not forget all the in house financing HOG facilitated that will begin to show some serious defaults. And Sales that were boosted because of it.

7. Consumer spending on necessary items is declining. So shall spending excessive amounts on "Toys"

Your points are valid Jazzy, if you are willing to wait it out.

Short term however, I see pain. And Trust me, because my rating is 11

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#2) On January 02, 2009 at 1:14 PM, Jazzy33 (59.21) wrote:

I agree GNUBEE, this is definitely a long term play. Short term...who knows. Great points...

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#3) On January 02, 2009 at 1:24 PM, Mary953 (66.50) wrote:

I stay away from all things on two wheels.  I tend to lean the wrong way (when did that happen?  I used to be really good at these things?) But trust me - to a Baby Boomer -

A Harley is Not a Toy!  Got it kids? NOT A TOY!  A Harley is a WAY OF LIFE!

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#4) On January 02, 2009 at 1:41 PM, kstarich (30.62) wrote:

Jazzy,

Not a good pick.  I'm a serious Harley enthusiast here in the home town of Harley-Davidson and I can tell you that their only hope is exports.  The market for new bikes is flat as a floor board.  My husband and I both ride and are heavily involved in bike event planning.  I can tell you that it is a stretch to get people involved in events.  The "cult" following is hanging on a thread when gas prices are high (which will reappear) and other costs such as hotels, and bike maintenance are factored into enjoying the sport.

The dealers are catering food to their locations for special evening get togethers to bring in customers.  THe food is gone in an hour but nobody is buying a bike.  There are dealerships for sale on the QT.  Only serios inquiries are taken.  I could go on and on about stuff I know but to suffice it to say there are better opportunities out there.  I sold all my HOG stock when it was in the high 40's.

You may be waiting a long time for this hot rod of a stock to be hot again.  Also keep in mind the average age of a HOG member is 45 or older.  The younger crowd prefers a crotch rocket.  Retirement funds will be more important than a new bike.

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#5) On January 02, 2009 at 1:44 PM, motleyanimal (93.53) wrote:

Harley Investor Comment

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#6) On January 02, 2009 at 1:49 PM, motleyanimal (93.53) wrote:

My links never seem to work. That prior post was supposed to be a pig snort.

 Free Sound Effects Download thousands of free sound effects from PartnersInRhyme.com

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#7) On January 02, 2009 at 2:27 PM, Option1307 (29.90) wrote:

Their sales are going to crash this year. Be very careful with this one...

Yes, you make some good points but they are also a bit wishful. I think most people still consider a motorcycle a discretionary item, even if it is a Harley. Thus there will be many less sales this year.

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#8) On January 03, 2009 at 8:34 AM, mountaingrappler (< 20) wrote:

 Up front, I own Hog so I'm biased.

I think the stock is priced so historically low that it's a good buy up to about $22.50.

My reasoning: Using numbers found at MSNmoney I averaged earnings back 10 years = $2.259 per share. Price to Earnings using average 10 year earnings (not last year earnings or the year before) is below 10 up to a stock price of $22.50. When has HOG sold at PE below 10 or even below 20?

Further a strong and regularly increasing dividend. The dividend yield using current payout amount and a price of $22.50 is a very respectable 5.87%.

HOG closed today @ $18.40. Below is a link to my blog where I give a more detailed explanation of the above. My $0.02!

Harley Davidson in a Different Light

 

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#9) On January 04, 2009 at 12:34 AM, kstarich (30.62) wrote:

Mountain

HOG will be lucky to break $20.  Dealers are now offering the latest to sell new bikes- bring in your sportster they will give you the original puchase price (regardless of miles) if you trade up for a bigger bike.  They also tried buy a Road King and get a sporty free.  Dealers are desperate to move bikes!  The Harley factory will be closed Mon. and Tues.  Unpaid vacation days for workers not a good sign.  We hear rumblings of layoffs.

Ther are better opportunities out there.

 

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#10) On January 04, 2009 at 2:05 AM, falang1 (96.52) wrote:

I'm sorry, I can't see it.

 I feel that most of the people who either have Harleys or want them are, frankly, older and those people just got scared half to death this year with their finances.  Now who of those is going to take out a home equity and buy a Harley when they are worried about retirement?  Harley will go down hard mid term.  Their only hope is overseas market where they have a mystique like the Jeep brand.  But for a stock pick, I think it would be better to wait.  Harleys are an expensive toy. Not good in this economy.

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#11) On January 04, 2009 at 3:28 AM, tkallen78 (< 20) wrote:

All the numbers look right but as many have said so far I am cautious about this one. I think with the low interest offers and discretionary spend tightening, this stock will face some hardship in the first two quarters of the year. I would expect a cut in dividend payout if the trouble gets dire. However Jazzy, this is a great long term stock as you said. When it tests around it's 52 week low again I may jump in, right now I am sitting tight- I think stocks will get cheaper in the next few weeks.

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#12) On January 04, 2009 at 11:51 PM, kstarich (30.62) wrote:

This is my last post about Harley ( I reserve the right to change my mind)  I live in the land of Harley, I am a serious rider and am very connected to people invovlved in the business.  My 10 cents worth is Harley is losing touch with the progression of the business in America.  Harley got the ball rolling with Clint Eastwood and Easyrider however in the last 10 years they have progressively lost the innovation on bike designs and instead the custom shops or after market companies continue to define the market.  Harley is losing millions to these companies, Klickwerks, Fat Baggers Inc., and Lehman Trikes to name a few.

These companies are redesigning bikes and after market products for current models so fast it reminds of my dog running around the yard trying to chase the birds.  The dog never catches the bird, gets tired of trying and gives up.  Harley has given up, lets the after market figure out the new technology and then in a couple of years they modify their design to what the after market companies design.

I spent close to 10k on after market products to make my bike cool and this is pretty normal.  Harley does very little to promote thier dealers with National advertising.  They are often at odds with dealerships with events and merchandizing.  They are clearly focusing their attention on the overseas market which is difficult with the high export cost they have not been successful at negotiating. 

I would not by this stock at $10.

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#13) On January 05, 2009 at 3:19 AM, Mary953 (66.50) wrote:

I am far removed from the entire world of bikes and riding.  Harley has that mystique of Easy Rider for me even though I don't ride.  Still, nostalgia will not keep a company in business. 

I have to defer to the more expert opinion here.  If I were choosing between Johnson & Johnson,  P&G, and other similar companies, my personal experience with P&G would lead me to choose it first. Kstarich has the type of inside knowledge that makes the CAPS community so valuable.

Based on that information and the current economy, I would regretfully pass on this stock in the real market and mark it underperform in CAPS. Thank you for your perspective, kstarich.

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#14) On January 05, 2009 at 9:22 AM, Jazzy33 (59.21) wrote:

Great discussion and points made be all. I agree with Mary953's comment that the CAPS community is a valuable resource for all of us. Where else could you get the opinion of multiple investors who really care about companies and not just the direction of stock prices? I have yet to find a similar online community with such incredible members who are willing to share advice in a way that is actually helpful and informative.

As for being a HOG, I think I'll stay in the saddle for now. For the reasons I pointed out in my initial post, I believe this company will outlast the after-market competitors and remain a solid long term investment. While I agree that there may be many other companies out there that could deserve your investment dollars before this company, I am thinking long term.

Maybe I'll be left in the dust of this stock further down the road, that's the risk that any investor takes. But I am riding on in hopes that this company continues to do what it has done in the past and remains an American icon far into the future. Best of luck to all of you and know that even if I am sticking with my glasspacks, your comments will never fall upon deaf ears!

 

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