Tag: davidson

I am entering this fray because it involves on of my holdings, Harley Davidson (HOG)

A new Obama ad said:
“The ad featured McCain appearing at the recent Sturgis motorbike rally in South Dakota where he proclaimed to cheering bikers: “Not long ago a couple hundred thousand Berliners made a lot of noise for my opponent.

“I will take the roar of 50,000 Harleys any day!”

With the noise of a motorcycle engine throbbing in the background, the Obama ad’s narrator says: “It’s time to hear the roar of a strong American economy again, and stop John McCain from shipping our jobs overseas.”

Rick Gray, an avid biker who is mayor of Lancaster in Pennsylvania, not far from York, said in an Obama campaign statement that McCain was guilty of hypocrisy.

“John McCain should be ashamed of himself, not just for voting against protecting an American company like Harley-Davidson, but then for going in front of a group of motorcyclists in Sturgis and pretending to be one of them,” he said.

The statement noted that the local Harley factory was shedding 300 workers, as McCain came to York to press home his message to blue-collar workers that Obama is a dangerous risk for the presidency. “

The jobs lost at the Harley Davidson plant have nothing to do with “jobs going overseas”. In fact, not a single Harley Davidson motorcycle is made anywhere but in the US and to the best of my knowledge no local government or the Feds use anything other than Harley’s (mainly police work) . The job losses are simply from the current decline in bike sales due to the economy and tighter credit markets. Simple

I know these ads use populist rhetoric to convey a message in 30 seconds, but, ought they not contain a glimmer of truth?

Disclosure (“none” means no position):Long HOG

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The Davis Select Advisers Fund has files a 13D/A with the SEC.

In the filing they disclose they now own over 23 million shares of Harley Davidson (HOG) or 10.07% of the outstanding total.

View full filing here:

Disclosure (“none” means no position):Long Hog

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Some interesting items from the 10-Q released by Harley Davidson (HOG).

HDFS (Harley Davidson Financial Services)
Income from securitizations during the first six months of 2008 was lower as compared to 2007 due primarily to the loss on the first quarter 2008 securitization transaction and the absence of a second quarter securitization transaction. This compares to two securitization transactions completed in the first six months of 2007.

During the first six months of 2008, HDFS sold $540.0 million in retail motorcycle loans in a securitization transaction and recognized a loss of $5.4 million, or 0.99% as a percentage of loans sold. This compares to a gain as a percentage of loans sold of 1.9%, or $32.5 million, on $1.75 billion of loans securitized in the first six months of 2007. The loss in 2008 was driven by increased securitization funding costs due to capital market volatility and higher projected credit losses. During the first six months of 2008, HDFS retained $54.0 million of the subordinated securities issued by the securitization trust. The subordinated securities that were retained have been included in the investment in retained securitization interests (a component of finance receivables held for investment) in the Condensed Consolidated Balance Sheets. The cash proceeds from the 2008 securitization transaction are net of the cost of the retained subordinated securities.

Additionally, income from securitizations was negatively impacted during the first six months of 2008 by a $6.3 million write down of certain retained securitization interests. The write down, which occurred in the second quarter of 2008 and is considered a permanent impairment, resulted from a decline in the fair value of certain retained securitization interests due to higher actual and anticipated credit losses on those securitization portfolios. This compares to an impairment charge of $3.5 million incurred during the first six months of 2007.

Annualized losses on HDFS’ managed retail motorcycle loans were 2.14% during the first six months of 2008 compared to 1.63% during the first six months of 2007. The 30-day delinquency rate for managed retail motorcycle loans at June 29, 2008 increased to 4.65% from 4.36% at July 1, 2007. Managed retail loans include loans held by HDFS as well as those sold through securitization transactions. The increase in losses was primarily due to a higher incidence of loss resulting from an increase in delinquent accounts. The Company expects that HDFS will continue to experience higher delinquencies and credit losses as a percentage of managed retail motorcycle loans in 2008 as compared to 2007.

I would have though that these might have been worse than reported. The 30 day delinquency was essentially flat and portfolio losses were only .6% higher despite the credit market conditions. Harley Davidson’s lending arm is doing markedly better that either auto or credit card lenders are currently. With some visibility returning to credit markets, these might be the highest these ratios get a nd we could see additions to earnings from here on out.

Financing Activities

The Company’s financing activities consist primarily of share repurchases, stock issuances, dividend payments and finance debt activity. During the first half of 2008, the Company repurchased 3.8 million shares of its common stock at a total cost of $150.1 million. The Company repurchased 3.1 million of these shares under a general authorization provided by the Company’s Board of Directors in October 2006 to buy back 20.0 million shares. As of June 29, 2008, no shares remained under this authorization.

The remaining 0.7 million shares were repurchased under an authorization granted by the Company’s Board of Directors in December 2007, which separately authorized the Company to buy back up to 20.0 million shares of its common stock. In addition, the Company also has an authorization from the Company’s Board of Directors that is designed to provide the Company with continuing authority to repurchase shares to offset dilution caused by the exercise of stock options and the issuance of nonvested stock. Please see Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds” for additional details regarding the Company’s share repurchase activity and authorizations.

Full Filing

Disclosure (“none” means no position):

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Looks like in banking it is now a two horse race. JP Morgan (JPM) reported today and like Wells Fargo (WFC) yesterday, investors were undoubtedly pleased.

From the Release:
JPMorgan (JPM) today reported 2008 second-quarter net income of $2.0 billion, compared with net income of $4.2 billion in the second quarter of 2007. Earnings per share of $0.54 were down 55%, compared with earnings per share of $1.20 in the second quarter of 2007. Current-quarter results include the effect of merger-related items amounting to a net loss of $540 million (after-tax) related to the acquisition of The Bear Stearns Companies Inc., which closed on May 30, 2008. Excluding these items, net income would have been $2.5 billion.

Jamie Dimon, Chairman and Chief Executive Officer, commented on the quarter: “Our earnings were down significantly due to the unfavorable credit environment and market conditions. The Investment Bank took additional markdowns on leveraged loans and mortgage-related positions. Retail Financial Services experienced further deterioration in its home lending portfolio, which resulted in higher charge-offs and an increase in the allowance for credit losses. However, the firm overall continued to maintain solid underlying business momentum. We had market share gains in Investment Banking fees and key product areas. Retail Financial Services posted organic revenue growth of 15%, and all of our major businesses produced growth in accounts, balances and volumes. Further positive results in the quarter included record performance from both Commercial Banking and Treasury & Securities Services.”

Mr. Dimon added, “We also completed the highly complex Bear Stearns acquisition as planned. Through the truly remarkable partnership and efforts of our people in extremely difficult times, we made great progress towards full integration, while also significantly reducing our combined risk positions. We now have an expanded platform to better serve our institutional clients – one which we fully expect will make our franchise stronger over time.”

Mr. Dimon further remarked, “I am pleased with the strength of our balance sheet and capital positions, particularly in the context of the market challenges we have faced during the past year. During the quarter, we added $1.3 billion to our allowance for credit losses (which now totals $13.9 billion) and maintained strong capital ratios.”

Discussing the firm’s outlook, Dimon said, “Our expectation is for the economic environment to continue to be weak – and to likely get weaker – and for the capital markets to remain under stress. We remain conscious that since substantial risks still remain on our balance sheet, these factors will likely affect our business for the remainder of the year or longer. However, the firm has delivered underlying growth across most of our businesses, and with our substantial capital base we can continue to invest for the future. In spite of the environment, we are confident that we are building an increasingly strong and profitable company.”

Dick Bove said:

Bove is right, Dimon is tempering expectations as there is still some ambiguity out there. Rather than thump his chest and make flashy predictions, Dimon reminds people it is tough out there.

Now here is the good part for shareholders. Because of his superior management ability, like Sherwin Williams (SHW) and Harley Davidson (HOG) earlier today results were not nearly as bad as expected. Poor operating environments will inevitably lead to earnings decline but superior management will soften the losses compared to peers while positioning the company to take advantage of the eventual economic rebounds.

Meanwhile people over0react to the operating environment forgetting the superior management and thus “value” investing opportunities are created….

Disclosure (“none” means no position):Long WFC, SHW, HOG, None

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So, maybe it would seem high gas prices are providing a buffer for Harley Davidson (HOG) against the economy?

Harley-Davidson (HOG) reported Q2 EPS of $0.95 this morning, 19 cents better than estimates. Revenue for the quarter was $1.57 billion vs. consensus of $1.4 billion.

“During the second quarter we shipped 80,326 Harley-Davidson® motorcycles to our dealers and distributors around the world. While this result exceeds our guidance range of 76,000 to 80,000 units for the quarter, it is a decrease of 15.6 percent from the year-ago period. This decrease reflects the impact of the shipment reduction we announced April 17th in response to ongoing weakness in the U.S. economy,” said Jim Ziemer, CEO.

For the first six months of 2008, revenue totaled $2.88 billion, a 2.9 percent increase over the year-ago period. Earnings per share were $1.74, a decrease of 7.9 percent compared to the same period last year.

Through the first six months of this year, shipments of Harley-Davidson motorcycles were 152,194 units, a 6.6 percent decrease compared to last year’s 162,878 units.

The Company expects to ship between 74,000 and 78,000 Harley-Davidson motorcycles during the third quarter of 2008. For the full year of 2008, Harley-Davidson still plans to ship between 303,500 and 307,500 units. The Company continues to expect full-year EPS of $3.00 to $3.18.

The Company repurchased 1.3 million shares of its common stock at a cost of $50.0 million during the second quarter of 2008. On June 29, 2008, the Company had 235.3 million shares of common stock outstanding. As of June 29, 2008, there were 19.3 million shares remaining on a board- approved share repurchase authorization.

When one consider the current economic environment and credit conditions out there, these results really are fantastic. Far from a “luxury item”, it would seem motorcycles, especially Harley are becoming the alternative of choice for gas pained consumers.

Here is the kicker, when credit conditions improve, sales ought to increase even further. One really ought not expect oil and gas prices to fall very far anytime soon so motorcycles as an alternative will remain while becoming more affordable.

International sales, the current growth of the company grew 11%. What will be interesting and I hope it is asked on the earnings call is what contribution can be expected from the recent acquisition. Also, can someone ask is the double digit growth these is expected to continue for a while?

Disclosure (“none” means no position):Long HOG

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Harley Davidson (HOG) is expanding its footprint overseas. With International sales increasing 16%-20% even in the current environment, the move makes perfect sense.

“Harley-Davidson, Inc. (HOG) today announced the signing of a definitive agreement to purchase the Italian motorcycle maker MV Agusta Group (MVAG). Under the agreement, Harley-Davidson will acquire 100 percent of MV Agusta Group shares for total consideration of approximately 70 million euros ($109 million), which includes the satisfaction of existing bank debt for approximately 45 million euros ($70 million). In addition, the agreement provides for a contingent payment to Claudio Castiglioni in 2016, if certain financial targets are met. MV Agusta Group is privately held, with the Castiglioni family owning 95 percent of MVAG shares.

The acquisition is expected to close in several weeks, pending the satisfaction of contingencies and receipt of regulatory approvals. Harley-Davidson intends to fund the transaction primarily through euro-denominated debt.

MV Agusta Group has two families of motorcycles: a line of exclusive, premium, high-performance sport motorcycles sold under the MV Agusta brand; and a line of lightweight motorcycles sold under the Cagiva brand. MV Agusta’s F4-R motorcycle, powered by a 1078cc in-line four-cylinder liquid cooled engine, is rated at 190 hp. The company sells its products through about 500 dealers worldwide, the vast majority of them in Europe. In 2007, MVAG shipped 5,819 motorcycles. During 2008 MVAG has significantly slowed production due to financial difficulties.

“Motorcycles are the heart, soul and passion of Harley-Davidson, Buell and MV Agusta,” said Harley-Davidson, Inc. Chief Executive Officer Jim Ziemer. “Both have great products and close connections with incredibly devoted customers. The MV Agusta and Cagiva brands are well-known and highly regarded in Europe. They are synonymous with beautiful, premium, Italian performance motorcycles,” Ziemer said.

Harley-Davidson, Inc. plans to continue to operate MV Agusta Group from its headquarters based in Varese, Italy. Following closing, the first priority will be to appoint a leadership team to include a new Managing Director and to resume the manufacture of current models.”

Full release

Disclosure (“none” means no position):Long HOG

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Energy Conversion (ENER)- Broadpoint Capital Neutral » Buy
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Fastenal (FAST)- BB&T Capital Mkts Hold » Buy
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Dyncorp Intl (DCP)- Stifel Nicolaus Hold » Buy
CF Industries (CF)- Credit Suisse Neutral » Outperform
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Broadcom (BRCM)- Piper Jaffray Neutral » Buy
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J. Crew (JCG)- Citigroup Sell » Hold
ARM Holdings (ARMH)- UBS Neutral » Buy
BT Group PLC (BT)- UBS Sell » Neutral
Suncor Energy (SU)- JP Morgan Neutral » Overweight
Network Appliance (NTAP)- Robert W. Baird Neutral » Outperform
Convergys (CVG)- Oppenheimer Perform » Outperform
Popular Inc (BPOP)- Keefe Bruyette Underperform » Mkt Perform
First Bancorp (FBP)- Keefe Bruyette Underperform » Mkt Perform

Downgrades
Ultratech (UTEK)- DA Davidson Buy » Neutral
MiddleBrook Pharma (MBRK)- Pacific Growth Equities Buy » Neutral
MiddleBrook Pharma (MBRK)- Pacific Crest Buy » Neutral
Time Warner (TWX)- Lehman Brothers Overweight » Equal-Weight
Vulcan Materials (VMC)- Longbow Buy » Neutral
United Thera (UTHR)- Stanford Research Buy » Hold $101
Marshall & Ilsley (MI)- Morgan Keegan Outperform » Mkt Perform
Noven Pharma (NOVN)- Jefferies & Co Hold » Underperform $11 » $9
Omnicom (OMC)- Bernstein Outperform » Mkt Perform
Airgas (ARG)- BB&T Capital Mkts Buy » Hold
CBS Corp (CBS)- Lehman Brothers Equal-Weight » Underweight
News Corp (NWS)- Lehman Brothers Overweight » Equal-Weight
Walt Disney (DIS)- Lehman Brothers Equal-Weight » Underweight
Orthofix (OFIX)- Wachovia Outperform » Mkt Perform
Calpine (CPN)- Lehman Brothers Overweight » Equal-Weight
Acme Packet (APKT)- Piper Jaffray Buy » Neutral
Acme Packet (APKT)- JP Morgan Overweight » Underweight
Agnico-Eagle Mines (AEM)- UBS Buy » Neutral
Qimonda (QI)- UBS Buy » Neutral
Merck (MRK)- UBS Buy » Neutral
Marshall & Ilsley (MI)- JP Morgan Neutral » Underweight
AstraZeneca (AZN)- Deutsche Securities Buy » Hold
Zions Bancorp (ZION)- Robert W. Baird Outperform » Neutral
Pacific Rim Mining (PMU)- BMO Capital Markets Market Perform » Underperform
On2 Technologies (ONT)- Merriman Curhan Ford Buy » Neutral

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Flowserve (FLS)- BMO Capital Markets Market Perform » Outperform
Bankrate (RATE)- Merriman Curhan Ford Neutral » Buy
Commercial Metals (CMC)- Davenport Neutral » Buy
Marten Transport (MRTN)- BB&T Capital Mkts Hold » Buy
Beneficial Mutual Bancorp (BNCL)- Boenning & Scattergood Market Perform » Market Outperform
Celadon Group (CLDN)- BB&T Capital Mkts Hold » Buy
First Commonwealth (FCF)- Janney Mntgmy Scott Sell » Neutral
Energy Conversion (ENER)- Broadpoint Capital Neutral » Buy
Penn Natl Gaming (PENN)- Sterne Agee Hold » Buy
EMC Corp (EMC)- RBC Capital Mkts Sector Perform » Outperform
Fastenal (FAST)- BB&T Capital Mkts Hold » Buy
Southwest Bancorp (OKSB)- Stifel Nicolaus Hold » Buy
Dyncorp Intl (DCP)- Stifel Nicolaus Hold » Buy
CF Industries (CF)- Credit Suisse Neutral » Outperform
Temple-Inland (TIN)- Credit Suisse Neutral » Outperform
Smurfit-Stone (SSCC)- Credit Suisse Neutral » Outperform
Saia (SAIA)- BB&T Capital Mkts Hold » Buy
Con-way (CNW)- BB&T Capital Mkts Hold » Buy
Juniper Networks (JNPR)- Piper Jaffray Neutral » Buy
Ameristar Casinos (ASCA)- JP Morgan Underweight » Neutral
Kindred Healthcare (KND)- Friedman Billings Mkt Perform » Outperform
Broadcom (BRCM)- Piper Jaffray Neutral » Buy
Suncor Energy (SU)- Friedman Billings Mkt Perform » Outperform
J. Crew (JCG)- Citigroup Sell » Hold
ARM Holdings (ARMH)- UBS Neutral » Buy
BT Group PLC (BT)- UBS Sell » Neutral
Suncor Energy (SU)- JP Morgan Neutral » Overweight
Network Appliance (NTAP)- Robert W. Baird Neutral » Outperform
Convergys (CVG)- Oppenheimer Perform » Outperform
Popular Inc (BPOP)- Keefe Bruyette Underperform » Mkt Perform
First Bancorp (FBP)- Keefe Bruyette Underperform » Mkt Perform

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Ultratech (UTEK)- DA Davidson Buy » Neutral
MiddleBrook Pharma (MBRK)- Pacific Growth Equities Buy » Neutral
MiddleBrook Pharma (MBRK)- Pacific Crest Buy » Neutral
Time Warner (TWX)- Lehman Brothers Overweight » Equal-Weight
Vulcan Materials (VMC)- Longbow Buy » Neutral
United Thera (UTHR)- Stanford Research Buy » Hold $101
Marshall & Ilsley (MI)- Morgan Keegan Outperform » Mkt Perform
Noven Pharma (NOVN)- Jefferies & Co Hold » Underperform $11 » $9
Omnicom (OMC)- Bernstein Outperform » Mkt Perform
Airgas (ARG)- BB&T Capital Mkts Buy » Hold
CBS Corp (CBS)- Lehman Brothers Equal-Weight » Underweight
News Corp (NWS)- Lehman Brothers Overweight » Equal-Weight
Walt Disney (DIS)- Lehman Brothers Equal-Weight » Underweight
Orthofix (OFIX)- Wachovia Outperform » Mkt Perform
Calpine (CPN)- Lehman Brothers Overweight » Equal-Weight
Acme Packet (APKT)- Piper Jaffray Buy » Neutral
Acme Packet (APKT)- JP Morgan Overweight » Underweight
Agnico-Eagle Mines (AEM)- UBS Buy » Neutral
Qimonda (QI)- UBS Buy » Neutral
Merck (MRK)- UBS Buy » Neutral
Marshall & Ilsley (MI)- JP Morgan Neutral » Underweight
AstraZeneca (AZN)- Deutsche Securities Buy » Hold
Zions Bancorp (ZION)- Robert W. Baird Outperform » Neutral
Pacific Rim Mining (PMU)- BMO Capital Markets Market Perform » Underperform
On2 Technologies (ONT)- Merriman Curhan Ford Buy » Neutral

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Amer Italian Pasta (AITP)- DA Davidson Underperform » Buy
Liberty Prop (LRY)- Stifel Nicolaus Hold » Buy
Administaff (ASF)- First Analysis Sec Equal-Weight » Overweight
Kensey Nash (KNSY)- Susquehanna Financial Neutral » Positive
ASM Intl NV (ASMI)- Jefferies & Co Hold » Buy
Endurance Specialty (ENH)- JP Morgan Neutral » Overweight
Mueller Water (MWA)- Robert W. Baird Neutral » Outperform
Borg Warner (BWA)- Lehman Brothers Equal-Weight » Overweight
Smith & Nephew (SNN)- UBS Neutral » Buy

DOWNGRADES
Mentor Graphics (MENT)- DA Davidson Buy » Neutral
Bankunited Fin (BKUNA)- Friedman Billings Mkt Perform » Underperform
Methanex (MEOH)- UBS Buy » Neutral
Bankunited Fin (BKUNA)- Sun Trust Rbsn Humphrey Buy » Neutral
Infosys (INFY)- Susquehanna Financial Positive » Neutral
Platinum Underwriters (PTP)- JP Morgan Neutral » Underweight

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UPGRADES
Amer Italian Pasta (AITP)- DA Davidson Underperform » Buy
Liberty Prop (LRY)- Stifel Nicolaus Hold » Buy
Administaff (ASF)- First Analysis Sec Equal-Weight » Overweight
Kensey Nash (KNSY)- Susquehanna Financial Neutral » Positive
ASM Intl NV (ASMI)- Jefferies & Co Hold » Buy
Endurance Specialty (ENH)- JP Morgan Neutral » Overweight
Mueller Water (MWA)- Robert W. Baird Neutral » Outperform
Borg Warner (BWA)- Lehman Brothers Equal-Weight » Overweight
Smith & Nephew (SNN)- UBS Neutral » Buy

DOWNGRADES
Mentor Graphics (MENT)- DA Davidson Buy » Neutral
Bankunited Fin (BKUNA)- Friedman Billings Mkt Perform » Underperform
Methanex (MEOH)- UBS Buy » Neutral
Bankunited Fin (BKUNA)- Sun Trust Rbsn Humphrey Buy » Neutral
Infosys (INFY)- Susquehanna Financial Positive » Neutral
Platinum Underwriters (PTP)- JP Morgan Neutral » Underweight

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Although Harley Davidson (HOG) earlier in the year dramatically reduce EPS estimates, I am beginning to think we may see them eclipse them when they report.

In early May I noted additional evidence that consumers were turning to two wheels as gas prices climbed toward $4 a gallon.

Now that is has hit $4 nationally, it seems to flow is turning into a flood.

NBC San Diego reported that Harley Davidson dealerships in the area are seeing huge response to $4 gas.

“We’re seeing a huge influx of new riders coming in,” said Mike Moran of San Diego Harley-Davidson. “It’s been incredible.”

Because of gas prices, sales have increased dramatically, say workers at the business.

“I drive a 1990 Ford Bronco,” customer Warren Deeds said. “I get, like, 13 miles a gallon, and being a bigger guy, I don’t fit into the more fuel-efficient smaller cars, so I was looking at motorcycles today.”

Deeds and his friend Joey Claiborne are both in the market for new rides.

“If I can get 30 mpg –a lot, probably a couple of hundred a month, probably a little more,” Claiborne said, discussing how much money riding a motorcycle could save him.”

Previous reports of increasing Harley sales were from Illinois, Florida and LA. HOG predicted an 8% drop in motorcycle sales this year ans that will be the key measure when earnings are reported mid-July.

I for one will not be surprised and do expect to hear that trend are improving in terms of sales. Now, the performance of HDFC will have a large impact on results but I expect those who have sold the stock expecting dire news are going to be disappointed.

Disclosure (“none” means no position):Long HOG

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