Friday, May 10, 2013

That's the news

Before I start with the news, I just want to offer an update to my report on Seeking Alpha about Harley-Davidson.  Not long after I published that article, a Morgan-Stanley analyst initiated coverage (I think it was rated a buy) with a $62 price target.  So, I started thinking that maybe my target of $60 was a little too conservative.  After all, the market is reacting pretty darn positively to the Q1 results, and that could push the stock much higher than I had forecast.  After some reflection, I didn't change my forecast, and here's why.

First, HOG makes money by shipping to independent retailers, and in Q1 the Company shipped more units than were sold at retail, meaning the results were in part due to "channel stuffing."  By saying that, I don't want to imply that management intentionally did something to make the results look better than they were; I'm just saying that those bikes still need to be sold at retail before you can really call them sold.  Dealer orders will be lower because of those excess bikes in inventory.  Of course, it could be that Q2 retail sales will surpass expectations, in which case, no harm done.

Then, I watched a video, which at first glance didn't have much to do with Harley-Davidson.  It was about beer sales, and how the weather, and expected weather for this summer are expected to affect those sales.  Here's the link: Big Breweries Face Threat Worse Than Craft Beers.

The main takeaway from the article is this quote:
"If it's nice and warm out, there's more people that are outside mowing the lawn, having picnics, at ballparks, and what do they do? They drink beer," Walsh told “Big Data Download.” He said big brewers already saw lower beer sales in the first quarter of the year.
 Well, they drink beer and ride motorcycles, actually, although we hope they don't do those at the same time.  Anyway, although the article doesn't mention it, the video goes on to say that too hot temperatures can also negatively impact beer sales because people tend to stay indoors with air conditioning, and I guess air conditioning and beer don't go together.  I suspect, though, that extreme heat can also put people off from riding motorcycles since you could just get in your air conditioned car.  So, as I see it, moderate temperatures in the Spring are much better for beer and motorcycle sales, and at least locally, it looks like temperatures are going to go from cooler than normal to HOT.

Then I started thinking about how that might affect motorcycle sales for the whole year.  I mean, if I were going to invest that kind of money in a motorcycle, I would want to have as much riding time as possible that first year.  So, if bad weather delayed my purchase, I may just wait until next year, when I can get the maximum utility out of that bike right away, and spend my money this year on something else, like an air conditioner.

Of course, there is one other factor, and that is the by now over-reported end of the Social Security tax holiday, which gave most people a 2% haircut on their paycheck.  I suspect that at least some of the less than stellar retail sales for Harley-Davidson can be attributed to that.

At any rate, I'm still sticking to my guns with the $60 price target on HOG.  Anything over that at this point would just be speculation.

As Stocks Rise, Frustrated Investors Vent About Ben Bernanke
Some guys don't understand monetary policy and think he's doing wrong thing.

Others think it's immoral that markets aren't let to clear (meaning, collapse to a point where someone will swoop in and just buy). Others are pissed because they missed the rally so they blame Bernanke as the exogenous factor that made them wrong. Like "if not for this STUPID policy I'd be making money."
All three of these boil down to the same thing: "My investments are under-performing and it's the Fed's fault."  Cuz, you know, it can't be my own fault.  I'm that awesome.  Of course, then there are the guys that want to point out their own investment results and claim sole responsibility.  It's easy to be a genius in today's stock market.  In fact, all you have to do to be a genius in today's market is read Benjamin Graham's Intelligent Investor (or at least say you did and know a couple of stock valuation metrics), pick a stock with a decent dividend payout, say something like "I feel like it's gonna go up," (because these days investment analysis is kind of like channeling the spirits), and sit back and wait for the world to name you "stock guru of the month."  Make one great call, and suddenly you're a hero.  Make enough calls, and your hero status is virtually guaranteed since sooner or later one of those calls will be great.  And what that all means is that people either love or hate the Fed, but the people that love the Fed won't admit it.  Except for me.  I love the Fed.  Sometimes.

Bernanke says Fed increasing financial monitoring

Nothing really earth-shattering in that last link.  It's just kind of a slow news day.

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