Harley-Davidson, Inc. (HOG)

SH2F088 (95.67) Submitted: 4/04/07 7:02 PM

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I have a good friend who went to Dartmouth and then Harvard Medical School. He is now a thoracic surgeon. He also dreams about buying a Harley and riding around with black leather chaps on. My director of Human Resources has a Harley. I don't think it is right to characterize Harley customers as working class/subprime people. The Harley subculture also runs very deep; again I'm not sure Harley purchases should be characterized as a luxury -- it's more of a lifestyle.

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eilar (85.34) Submitted: 4/10/07 7:56 AM

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It's a luxury, and the proof is in the HR directors, lawyers, doctors, investment bankers, etc that are now the majority of Harley buyers. They used to be low cost alternatives to cars way back, now they are a lifestyle... ie, a luxury. Unemployment numbers that just came out are what is propping this stock up, if that big number was an abberation this stock will plop back down again with any minor fear of a recession. Play the fear game, and make money.

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Ferrari321 (99.64) Submitted: 4/12/07 10:49 AM

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For all the bears who want a good reason to short this POS ... my call is HOG will hit $50 before it hits $70

http://transport.seekingalpha.com/article/31861

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funk53daba (< 20) Submitted: 8/15/07 12:20 PM

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The fallacy expressed here is that harley is only about the working class. Much of Harley's sales come from white-collar folk who wish to "cut loose" on the weekends.

Additionally, with gas prices up, many people will rationalize purchasing a Harley b/c it saves gas! Also, resale value is solid compared to Japanese bikes.

The downside I have heard is that Harley has too many products. Ok, if we can see that, I'm sure mgmt. will catch wind of it and correct accordingly. But if one is looking for profit, probably best to buy now before they streamline and become "more profitable."

The brand is so strong, all levels of income wish to own one, b/c Harley epitomizes Americana. They'll rationalize purchasing one just as easy as investors rationalize doomsday for this stock. Until people start tattooing "Honda" on their neck, Harley is the place to be.

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Ferrari321 (99.64) Submitted: 9/05/07 4:46 PM

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A few points on why HOG is going lower:

1) Int'l sales growth -- definitely strong. No argument there but it only makes up 15% of HOGs revenues. What happens when the other 75% of your revenue base is declining by 5% y/y (or more)? For the life of me ... I really can't imagine the Chinese / Indian people riding a harley davidson motorcycle

2) HDFS accounted for about 14% of EPS in 2007 -- with credit markets tightening and the housing market blowing up-- what do you think are the chances that they'll be able to keep that up? HOG loans are going delinquent and are suffering from the same problems as housing... too much easy credit and no lending standards. Watch it reverse.

3) Insider Mgmt has pitched their shares. Just look up insider transactions on yahoo (http://finance.yahoo.com/q/it?s=HOG). Check out Jeffrey Bleustein's selling on Oct 13,2006 -- over $54mn worth of shares sold (46.6 7.5mn) @ $63 -- and your telling me this should be a $60 stock? Sure especially when the chairman sold more than half his original position.

4) Don't have any numbers on this but -- what % of HOG's customers do you think are blue-collar workers (ie construction / housing related). With housing markets collapsing where do you think they will get $ to support growth in 2008? Declining house prices, no jobs, no HELOC = No HOG sales.

5) If you think the US is headed towards a recession or a consumer slowdown is coming... guess what the first item to drop is? How about big-ticket discretionary items ... ie. motorcycles?? Also check out the secondary market for used HOG bikes -- lots of pressure coming there.

Anyways would love to debate with someone intelligent regarding HOG -- if you have something insightful to say -- would love to hear it.

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FoxyPicker (< 20) Submitted: 9/20/07 5:36 PM

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I agree with you that HOG is going lower, but I'm not actually short HOG right now. (I wish I had made that call when I first looked at the stock.) Unlike you, I look forward to riding HOG long through the coming recession, once the subprime hysteria has taken its toll on the stock.

I question your comment that bikes are among the first big-ticket discretionary items to go. That's because they are so conflated with an "identity" or "lifestyle" that many consider "necessary" to their pursuit of happiness. By analogy, the latest designer clothing for a teenager is NOT discretionary. It's a necessity. A teen will go without trips to his/her favorite fast food joint and will mow lawns and babysit to meet his/her fashion budget, irrespective of the state of the economy. Video games are likewise a necessity to teens and young adults. For the aging boomers, an alternative identity/lifestyle is every bit as important a necessity, and to many boomers, a big, noisy "hog" (and the parts, repairs, and accessories that go with it) are the most important aspect of that lifestyle. One can't run with the hogs on a Schwinn! Gotta have the noisy beast.

Question: if the biker lifestyle is indeed a disretionary aspect of one's life, how come HOG didn't crash with the rest of the market at the beginning of this century? I'd argue that it's when times are at their worst that escapism (in the form of alternative personas/lifestyles) is at its peak. I've observed many bikers from a distance, and their biking activity seems to flourish when they face hard times and/or become unemployed. I know one banker who bought not one, but three bikes upon losing his employment and facing some very meager re-employment prospects. Did he have lots of free cash sitting around? No. In fact he was gravely in debt, dipping into life insurance policies to fund his obsession. Whenever he gets upset about something, he takes off riding for hundreds/thousands of miles and sometimes returns with his wrecked bike in the back of someone's truck. He's smashed his foot twice (once almost having lost it), and his doctor has told him to give up the activity. However, he defiantly keeps on riding. Discretionary? No, it's a psychological necessity. He won't ever stop riding until he wraps himself around a tree (which we all expect will ultimately happen).

Again, look at the charts from 2000 onwards. I attribute HOG's strong performance to what I have described above. However, I'm open to (and would like to hear) alternative perspectives. I'm not arguing, but discussing. I would love to learn what others think.

PS HOG's customer demographics are on their web site. While they do have a subprime component, it's smaller than you might think.

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