Yesterday I posted Chasing Value: Harley-Davidson (HOG) looking on down the road and actually bought a few shares. Late in the day I received a comment from one of our frequent readers whose opinions I have grown to respect, although he can be a little harsh at times. This reader raised some interesting points I thought worth some consideration. He wrote:
- "I don't like the stock. I see it as a luxury item for aging Baby Boomers. The ones who always wanted one, (or who) already own one. The younger generations aren't interested. I also think you're making a classic mistake when you speculate by saying "if it returns to its former level within the next few years."
He is correct that there is no assurance a stock will return to past glory. It is entirely possible that a company may fade away, just like Levi Strauss did when competitors stormed its castle from all sides with cheaper products, fancier products, variations on a theme and jeans made by other strong brands that extended their product lines into Levi's historic stronghold.
Similar things are happening now to Harley-Davidson (NYSE: HOG) as Honda Motors, Yamaha, Kowasaki and Suzuki take on "style and look" of the classic American "HOG" ride. They do it cheaper, with less effort and even borrow American icons like eagles and flags to promote their machines. They also offer a smoother ride in many cases, as Harley clings to the past and continues producing motorcycles with what it calls "edgy" (read "rough") rides. It is also true that younger motorcycle enthusiasts do not appreciate the Harley mystique in the same way as Baby Boomers have.
Having given this reader his due, it is important to look at the broader picture. First, if he and I and all of you understand these issues, certainly the exceptional management at Harley are well aware of them too and are making plans to adapt to a changing world. HOG continues to develop new products, polish the brand, and expand into new markets. It is including women, minorities, and youth in all of its business plans. It is also expanding into foreign markets worldwide. If you lived in the Ukraine could there be a more pronounced way of making a statement to the Russians than riding around on a classic American icon? I don't think so.
Another facet to expanding markets for motorcycles in general is the rising cost of fuel. Still another is the traffic congestion in most major cities. If you have traveled at all in Europe or Asia you cannot have missed the huge number of motorbikes and scooters everywhere and it will happen here too, eventually.
I agree that Baby Boomers have been a prime market for Harley over the past decade, but this is not a fading crowd. This generation is just entering retirement age and has more financial capital than any generation before it. Many will not be able to resist the lure of buying a Harley-Davidson or a Winnebago to tour the country.
For myself, if I had the space, my fantasy would be to buy a bike to put in the living room, on top of a polished granite floor, with tons of chrome details and custom paint. A Harley is every bit as beautiful as many works of art I have seen and anyone who thinks otherwise is mistaken. Clearly, they have hypnotized this Baby Boomer, and I will not be retiring for a long time.
Therefore I have no concern as to whether Harley-Davidson will return to its recent highs, given the continued opportunity with Baby Boomers and new opportunities with women, minorities, youth, foreign markets, the energy conservationist and people fed up with traffic congestion. I would think almost everyone falls into one or more of these categories. My reader thinks I have made a classic mistake, but I think Harley-Davidson will remain a classic!
To find potential opportunities and verify my track record read Chasing Value or Serious Money.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He is on the advisory board of Internet start-up CircleBuilder.com.











Reader Comments (Page 1 of 2)
9-21-2007 @ 5:35PM
Larry said...
Not everyone especially young kids can afford a Harley. However if you go to a Harley advent, you might be surprised at the young people who attend. I bet the guy whose opinion on Harley that you value so much probabley owns a Goldwing or other metric bike. They always put HD down whenever they can so I would not put much stock in what they have to say about HD.
9-21-2007 @ 6:27PM
Steve Johnson said...
It's a misconception that Harley motorcycles appeal to baby-boomers only, and will fade away as the baby-boomers fade away.
The fact is that as bikers get older, they tend to prefer bikes that offer more comfort and styling. That's what Harley offers, a comfier, sit-up-straight riding position, with lots of bling.
There are, of course, older riders who gravitate to other brands (BMW, Honda), but even then, take a look at what those older riders are buying, touring bikes that offer comfort, styling, and amenities.
Harley will be just fine once this mortgage fiasco straightens itself out.
Steve (fellow biker)
9-21-2007 @ 9:31PM
CaptainMike said...
Everyone grows up driving a Chevy or worse, but all dream of having a Cadillac
9-21-2007 @ 10:47PM
hotdog said...
wet hen you get home after driving for 4 hours and working on your feet 10 hours and then driving 4 hours you go in the garage and see whatyou are working for.i know i sometimes drive 6 thousand miles amonth and work 70 hour weeks. you will never find ar better harder working bunch than hog owners i have 2 harleys and plan to buy a new one next year . in anutshell why settle for second best and by the way did it ever occur to you the most desirable and sought is what ever we cant have eve
9-22-2007 @ 5:19PM
Ian said...
Everyone loves a Harley Davidson, the silly metric v.s Harley debate goes on and on. I have two Harley and young and old love to see me thunder by.
I also need to see the stock go back up, I am sure it will, the brand is too strong to be worried a bump in the road.
Ian
http://www.MyChopperBlog.com
9-23-2007 @ 12:02AM
Sam said...
While other's may be copying the Bike none have come close to copying the marketing of Harley Davidson. Walking into a Harley Davidson Dealership is NOT like walking into any other Dealership of any other kind of Motorcycle. Many rival small department stores - and it's all "Harley" merchandise. Clothing, helmets, shoes, mugs, clocks, even underwear -the list goes on and on. Their superior marketing approach is why I believe the company will continue to prosper and grow in the long run.
9-23-2007 @ 2:34AM
kpaul said...
As a motorcycle rider and tail end baby boomer I have to agree with your reader. HDs V-Rod has been a sales disappointment and it discontinued a spin-off of the V-Rod. Gen X and Y have no buy American thing nor are they attracted to type of bikes Harley makes, i.e. bikes called cruisers. I sold my HD stock last year. Even their younger rider oriented division Buell is having problem. Although they have new Buell 1125 coming out soon. It's motor was designed and built in Austria . So I am quite bearish on HD. Honda, Yamaha, Kawasaki, and Suzuki on the other hand is coming out with new models and concept bikes that appeal to Gen X and Y. These bikes also appeal to Europe and Asian buyers which aren't attracted to HD or cruiser style motorcycles. HD will have a hard time selling to oversea buyers. HD bikes are heavy, clumsy, slow, and don't have great brakes. If you notice on your trips overseas those bikes are light, agile, and have better performance. Much like European cars vs American cars in the 70s and 80s..
9-23-2007 @ 2:48PM
Sybil said...
Poor comparison - Harley vs Levi. As far as I know, Harleys are still manufactured in the U.S.
Add to your demographic groups the passionate buyers of "Made in the USA" products.
Harley is so identified with the USA world-wide. Levis used to be, and we were proud of it!
When Levi Strauss decided to have their products manufactured elsewhere (than our beloved San Francisco), that was the last time I bought Levis.
I own Harley Stock - until they go off-shore.
9-23-2007 @ 3:54PM
Sybil said...
The comparison of Harley to Levi Strauss is a button-pusher for me.
I represent a demographic that values "Made in the USA" very highly. Last I heard, Harley is still made here, so I own Harley stock, too. The rumor that Kawasaki was going to buy HOG, nearly blew out my blood pressure. Talk about a nightmare!
I was proud of Harley and Levi Strauss because of their reputation in the world market as (two of the few remaining) symbols of the USA.
When Levi Strauss announced that they would no longer manufacture their products in San Francisco USA, I considered it a "sell out" of the basest order and have never again purchased one of their products.
I used to consider myself a capitalist. Now I see big business as having sold us all out, with most available remaining jobs in this country in government bureaucracy and the service industry.
One thriving job market seems to be that of prison guard.
As long as Harley is "Made in the USA", stay with 'em.
9-23-2007 @ 3:58PM
Sybil said...
Sorry their was a glitch that caused two repetitive comments to be posted!
In fact, I was so sure I had dispensed with the first one... -Sybil
9-23-2007 @ 9:55PM
Roger said...
I am an older baby boomer and have raced, rode, and owned about every bike you can think of. My last bike was an 86 Low Rider custom. I still own it but recently I bought a V-Rod to try out. In my opinion, this is one of the fastest, greatest handling super bikes I have ridden yet. Ive owned it since March of this year, and every where I go, people come up and ask what I think of it and complement me on the looks of the bike. Im talking about traditional Harley riders.
This bike, without question is the best Ive ever owned and Ill probably buy another. If you havent tried it, go do so.
I believe Harley stock is a buy, and Ive watched it for three years. I have never owned a single share, but plan on doing so!
For what its worth, "Cheers to Harley!"
9-25-2007 @ 10:22PM
Uncle John said...
H.D. will be here as long as we have the freedom to ride.
9-26-2007 @ 9:39PM
Griff said...
De' Hog is a fine well built American machine, no doubt.
But, if you want to be different, a mustang, and not part of a herd, go ride an "all American" Victory.
9-26-2007 @ 10:16PM
JOHN said...
I OWN A 1990 HD FXLR CUSTOM.THIS BIKE IS LIKE NEW AND RUNS JUST THE SAME.I HAVE KEPT IT LIKE NEW AND HAVE 48000 PLUS MILES.
HERE IS WHAT I THINK
HARLEY IS NOT THE ONLY GAME IN TOWN ANYMORE. THERE ARE MORE BIKES AVAILABLE NOW THAT ARE GAINING APPEAL WITH THE MOTOCYCLE RIDING PUBLIC, VICTORY CYCLES,THE ROAD STAR SERIES FROM YAMAHA JUST TO NAME A FEW.I OWNED SHARES OF THE STOCK SINCE 1994 AND HAVE SOLD OFF THE BETTER PART OFF MY PORTFOLIO AS HIGH AS 71.45 CENTS A SHARE.SINCE THE STRIKE MY CONFIDENCE IN HD HAS DWINDLED.I DOUBT THAT IT WILL EVER SEE ANOTHER SPLIT AND I DOUBT THAT I WILL RECOVER FROM THE HIT IT TOOK FROM THE STRIKE.HARLEY MIGHT NOT GO AWAY BUT IT HAS SEEN ITS "DAY IN THE SUN".
JOHN
9-29-2007 @ 10:12PM
Mr. noitall said...
Well it looks like I stirred up alittle debate with my comments about HOG. First I'll say that I am an aging babyboomer myself, but not a biker, so I wasn't trying to promote other bikes above Harley- Davidson. I was just making a judgement on whether someone should buy the stock, based on my observations.
9-30-2007 @ 10:07AM
ed barneman said...
I STARTED RIDING AT AN "OLDER" AGE(63) AND OF COURSE I GOT A HOG.IVE OWNED 5 SINCE THEN AND CURRENTLY HAVE AN 06 STREET GLIDE.IT IS THE MOST COMFORTABLE BIKE I HAVE EVER RIDDEN.IM JUST A CRUISER ON WEEKENDS AND I WOULDNT RIDE ANYTHING NOT MADE IN AMERICA
10-02-2007 @ 12:31AM
Rose Golden said...
I respectfully disagree with your assessment of HD. My 29 year old son just bought his second HD--a Road He started with a Honda,has had a chopper,a Triumph, and a hard tail.They have all been used.He is looking forward to the day when he can buy new.There are many riders whose goal is a new HD, and they are in their 20's and early 30's.He says you can't beat the comfort of a HD.
10-02-2007 @ 9:59PM
JOHN said...
I STILL ENJOY MY HD.THE RIDE AND THE SOUND STILL MAKES ME WANT TO GET ON MY BIKE AND GO FOR A RUN. I WAS JUST COMMENTING ON THE STOCK AND ITS DROP IN PRICE AND THE PROSPECT OF IT EVER GOING AS HIGH AS IT WAS AT THE END OF 2006 AND ITS CHANCES OF EVER SPLITTING AGAIN WHICH WOULD MAKE IT A BUY .ITS A GOOD STOCK TO BUY JUST NOT A GROWTH STOCK LIKE IT WAS IN THE MID 80S AND EARLY 90S..
10-02-2007 @ 12:55PM
The BUZZ said...
In talking about investing in motorcycle manufacturers, the best this year has been Italian: Ducati (DMHY.Y)! A double+ so far this year (in 10 months) from $12 to $25 with a high of $30! It delisted from the NYSE (at $20 in June) to cut costs as it has in every administrative function while coming out with wholly redesigned awesome bikes which focusing on technology from Ducati's racing bikes. Ducati can't be beat on the World MotoGP cirque this year - Number 1 by far. Next year should be another incredible year for the stock resulting from further design developments, earnings (from -$0.35 in '06 to possibly $0.75 for '07 and $1.00+ in '08)! These are not "cruisers" designed for comfy long road trips. Rather, these are in high demand from a world wide (and USA in particular) non-baby boomer crowd that go for style and performance!
The baby boomers can remember when Harley turned around and what a fabulous investment that has been; Ducati could be the next turn around, but for the current generation! (I'm 64, have purchased the stock in the $11-$13 range after my son (34) told me to buy the stock last year in the $8 range because of the fantastic design changes comming that would drive demand through the roof. Of course, I had to wait to see for myself and missed out on a triple in 12 months!
10-02-2007 @ 4:04PM
Chuck said...
I now own three Harleys, and have owned only Harley since age 15, I'm now 67, I own and will continue to own HOG stock, As far as I'm concerned Harley is and will always be the best looking and riding bike made in the good old USA. I have logged well over 100,000 miles. My oldest is 2000 and the newest is '07 and try to buy a newer one every 3-4 years. I'm sorry to have to say this but the V-Rod turns me off.