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It was about a year ago that Warren Buffett agreed to invest $300 million in Harley-Davidson (HOG). It was a typical play for him -- that is, a great brand that was selling at a good value. Also, he got a special security with a 15% annual interest. It's nice to be a legendary billionaire investor, right?So while you may not get as big a payoff as Buffett, you will still do well if he's right yet again. In fact, on today's quarterly announcement, Harley's stock price is up 8% to $35.50. Keep in mind that when Buffett made his investment, the stock price was a mere $13.56.
True, the first-quarter was still tough, as profits plunged 72% and U.S. retail sales fell 24%. But going forward, things are expected to improve as the economy recovers and credit conditions get better. In fact, Harley is entering its main selling season. The company has made great strides with its cost-cutting.
But given the big move in the stock already, is there still room on the upside? Perhaps so. But it's certainly risky.
Actually, Harley is also the topic of buyout speculation. While deal-making is improving, it is dangerous to pick targets because such rumors are often wrong. So if you are thinking of buying some shares, it is probably a good idea to let things calm down for awhile.
Tom Taulli advises on business tax preparation and is also the author of a variety of books, including The Complete M&A Handbook. His website is at Taulli.com.
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