Harley-Davidson: Enjoy The Ride

| About: Harley-Davidson, Inc. (HOG)

I have followed Harley-Davidson (NYSE:HOG) for many years. My son has a highly performance modified Sportster and a new V-Rod so I guess I think there just isn't any other big bike you should own. Is there?

Lately the stock's price has been revving up and it deserves a look. During the past month the stock has soared, as you can see in this hourly trading graph provided by Barchart:

While the market as measured by the Value Line Index was up about 18% in the last 6 months HOG was up over 50%:

Harley-Davidson, Inc. engages in the production and sale of heavyweight motorcycles. It operates in two segments, Motorcycles and Related Products, and Financial Services. The Motorcycles and Related Products segment designs, manufactures, and sells cruiser and touring motorcycles for the heavyweight market. This segment offers five categories of motorcycles, including Touring, Dyna, Softail, Sportster, and V-Rod under the Harley-Davidson brand name; various motorcycle parts and accessories comprising replacement parts, and mechanical and cosmetic accessories; general merchandise, such as apparel and riding gear; and related services. It also licenses the Harley-Davidson name and other trademarks. This segment sells its products through a network of independent dealers and distributors primarily in North America, Europe, the Middle East, Africa, the Asia-Pacific, and Latin America.

The Financial Services segment provides wholesale retail financing; and insurance and insurance-related programs primarily to its dealers and their retail customers in the United States and Canada. Its wholesale financial services include floorplan and open account financing of motorcycles, and motorcycle parts and accessories; and retail financial services comprise installment lending for the purchase of its new and used motorcycles. This segment also offers motorcycle insurance, as well as extended service contracts, credit protection, motorcycle maintenance products, gap coverage, and debt protection products to motorcycle owners. The company was founded in 1903 and is headquartered in Milwaukee, Wisconsin. (Yahoo Finance profile)

Factors to consider:

Barchart technical indicators:

  • 100% Barchart technical buy signal
  • Trend Spotter buy signal
  • Above its 20, 50 and 100 day moving averages
  • 14 new highs and up 19.06% in just the last quarter
  • Up 40.47% in the last 12 months
  • Relative Strength Index 66.91%
  • Barchart computes a technical support level at 50.50
  • Recently traded at 53.08 with a 50 day moving average of 48.35
  • The chart below includes a 14 day turtle channel showing increasing lows

Fundamental factors:

  • Widely followed on Wall Street where 13 brokerage firms have assigned 18 analysts to run the numbers
  • Analysts predict revenue will increase by 6.80% this year and another 5.80% next year
  • Earnings are estimated to rise by 18.00% this year, 23.60% next year and continue at an annual rate of 14.40% a year for the next 5 years
  • These numbers resulted in analysts releasing 9 strong buy, 3 buy and 6 hold recommendations to clients. No sell or under perform reports were released
  • P/E ratio of 21.52 is not out of line for the earnings growth projections
  • The dividend rate is only1.23% so this is not an income stock but the rate is only 20% of earnings projections
  • Baby Boomers make up a large portion of new sales
  • Dealership are selling about 11% more units than last year

General investor interest:

  • As measured by the readership of Motley Fool over 1,858 readers have this stock on their watch lists
  • They voted 77% that the stock will beat the market
  • The more experienced All Stars voted 83% for the same result
  • Fool noted that 96% of recent articles have been positive on the stock
  • Some firms having the stock on thier buy lists were Citigroup and Wells Fargo while Jim Cramer, Wayne Rogers and Charles Payne also have made positive comments on the issue

Competition is hard to find so let's compare stocks pursuing the Boomers' discretionary dollars. While over the past 6 months HOG is up 51%, Polaris (NYSE:PII) was up 39%, Royal Caribbean Cruises (NYSE:RCL) up 7% and Carnival Cruises (NYSE:CCL) up 3%:

Summary: Harley-Davidson is a Boomer stock. Empty nesters have money to spend and they are now able to buy the Hog they always wanted. Double digit earning projection make the stock a winner.

Disclosure: I am long HOG. The stocks mentioned above may be held in either personal or family member accounts and/or mutual funds and separately managed accounts at Marketocracy Capital Management from whom I receive compensation as a financial analyst