Rob's Lobs

[billyjoe]

Runner,
If you had to buy a stock today, HDI probably would rank in the top 20% of choices , but do you really want to buy now ?

--------billyjoe

[Runner]

Billyjoe, I’m trying to figure out some of that FA stuff and since the market has been punk as of late I’ll not buy a long right now. Just trying to see if my FA fuzzy logic is making any sense. I think HDI is a strong company and will continue to please investors. How did you figure HDI is in the top 20%?

[billyjoe]

Runner,
I didn't actually figure percentages , but running HDI through many sites (mostly free) it always appeared near the top in ratings although some were using tecnical as well as fundamental analysis. The only area that you could say it was not near the top was performance vs. peers last 12 months which put it in the middle. Vectorvest rates it a hold maybe because their last year's
sales increase is at only 4% .
--------billyjoe

[jiesen]

Billyjoe, I’m trying to figure out some of that FA stuff and since the market has been punk as of late I’ll not buy a long right now. Just trying to see if my FA fuzzy logic is making any sense. I think HDI is a strong company and will continue to please investors. How did you figure HDI is in the top 20%?

Runner, that FA logic makes no sense. To buy when the market sucks ass is exactly what FA should tell you to do. The lower the better. You don't pay attention to price trends in FA, just the price relative to value. When it's cheap, buy. When the market rallies, and everyone is happy to buy, then it's time to sell for profit!

That's the heart of FA/value logic. It's hard to put in action, I know, because emotions tend to make everyone want to trade the TA (it's going up, buy!) but that's why 90% of traders lose money in the end.

[Rob]

Harley Davidson

This company has increased sales over the last 5 years from 3.3-4.0-4.6-5.0-5.3.
Price to earnings ratio is at 14.2 with 5 year PE high of 39.2
Gross Margin is a whopping 42.4% with the Industry average of 25.4%
Return on Equity is at 30.6
Return on Assets 17.9
5 year ROE 27.4
Book value/share has increased over the last 10 years from 2.19 to current 11.25.
PEG is currently 1.10
Dividend Growth (5 years) 44.97
Total Debt/Equity .35

Here are some numbers I’ve been looking at as I think earnings alone may be misleading by slanting the truth. Based of these numbers is this a strong company poised for future growth and what else might I be missing??

Runner, you've already found a lot of the important stuff that I was going to bring up, so no use repeating it. There is no question that Harley Davidson (HDI) has been performing outstandingly over the past several years in terms of earnings growth, as these graphs show:

So why is its P/E only in the high 14s when, according to USA Today, the current S&P P/E ratio is in the low 17s?

As you can see from an 18-year comaprison chart, HDI has been kicking the stuffing out of the S&P 500:

Now zoom in a bit and look at a 2-year comparison chart:

Whoah! What happened in April 2005? Obviously something spooked the market to an extent that HDI has yet to fully recover. A little research turned up what I'm pretty sure is the problem:

Harley-Davidson, Inc. Lowers FY 2005 EPS Guidance
2005 Apr 13 11:00 AM
Harley-Davidson, Inc. announced that it expects its full year 2005 earnings are expected to grow by approximately 5%-8% compared to its previous forecast of mid-teens earnings growth due to U.S. retail sales of Harley-Davidson motorcycles sales falling short of its expectations. According to Reuters Estimates, analysts on average were expecting the Company to report full year 2005 earnings of $3.37.

What's ironic is that full-year 2005 earnings in fact grew 14% from 2.99 to 3.41, even exceeding the analysts' avg. estimates prior to the projection warning. I think this serves to illustrate a market phenomenon I think of as a "sticky bottom," i.e. that stock valuations typically fall much easier and faster than they rise. That same tendency is seen in reverse at your local gas station. When the price of a barrel of oil jumps by a couple of percentage points in a day, the price at the pump reflects the increase almost immediatedly. But when that same barrel price decreases by a couple of percentage points in a day, it might take a week or more for the pump prices to noticably adjust.

Why has not Harley Davidson yet really recovered from that blow in April last year? I couldn't tell you. The S&P report on HDI estimates that EPS for 2006 is going to be 3.80. That's still a pretty healthy 11.4% over 2005's 3.41. One thing that institutional managers may be looking at is the fact that over the past year or so, the individual savings rate is negative, meaning that Joe U.S. citizen has spent more money than he earned. That may mean that consumer discretionary spending is expected to dry up somewhat in the near term, which would not bode well for sales of hawgs. This is only a guess on my part.

All things considered, the fact that the S&P's P/E ratio is almost 18% higher than HDI's would suggest that HDI is probably a decent buy at this point, probably best suited for a buy-and-hold type investor.

[peanuts]

All things considered, the fact that the S&P's P/E ratio is almost 18% higher than HDI's would suggest that HDI is probably a decent buy at this point, probably best suited for a buy-and-hold type investor.

Just to offer a tiny little bit of contrarianism... I hate that Harley Davidson is expanding sales into China. One of these days, we'll see Chinese knock-offs of some of the classiest bikes on the road. Maybe they'll even be called "Haley Davisons" in typical Chinese fashion.

The acceptance of international copyright laws should be a stipulation that should be met before doing business with good 'ol USA.

[Runner]

Rob and others I thank you for your time you’ve put in HDI. I come up with HDI’s intrinsic value for 2006 at $62.00 and 2007’s intrinsic value of $68.00

[Runner]

I took on a small position in HDI based purely on my fuzzy FA logic. I’m giving this much wiggle room. TA had zero influence in this decision and I guess we shall see!!

[Lyehopper]

....One of these days, we'll see Chinese knock-offs of some of the classiest bikes on the road.

The top three Japanese motorcycle manufacturers already have Harley knock-offs on the market RIGHT NOW and they have had them for years and they're getting better and better too. Did you not know this? or do you just dislike the Chinese more so than the Japanese?lol

[peanuts]

The top three Japanese motorcycle manufacturers already have Harley knock-offs on the market RIGHT NOW and they have had them for years and they're getting better and better too. Did you not know this? or do you just dislike the Chinese more so than the Japanese?lol

... sometimes the wrong hole starts talking. At least everyone wants to be like HD. I deal with Chinese people a lot. I've been there (China) several times- the air smells bad, they never stop honking their horns, my stuff was searched while left in my room, they're jaded about Mao, and their food makes me sick... I guess I've got some ill feelings harbored somewhere within me.

The people are very nice, though. I got my picture taken just about everywhere I went. They probably wanted to use it for advertising purposes...

[Rob]

GOOG C-Wave ?

Alright, techie people, please tell me if you would consider this a valid Elliott Wave pattern, and if so, what is portended to occur with this C-wave. Any explanations you might include to expain your conclusions would be welcome also.

[DSteckler]

Rob, see my post about Elliot contraction waves to answer your question.

[Rob]

Your Answer?

Dave, I appreciate that link; I really do. Please do not take offense, however, when I tell you that I find your answer to my question rather unsatisfying.

[DSteckler]

Dave, I appreciate that link; I really do. Please do not take offense, however, when I tell you that I find your answer to my question rather unsatisfying.

What makes it unsatisfying? The link is an excellent resource to help answer EW questions.

[Runner]

Sorry Rob my take on GOOG’s daily is not clear. Weekly is in drift mode and this signals caution for me.