Harley-Davidson (HOG)
We all know that Harley-Davidson (HOG) makes motorcyles–real motorcycles. Think big, powerful, and 
loud and you’ve covered a lot of their bikes. Of course they have quieter bikes and touring bikes as well, and they also own and produce bikes under the Buell name. Their brand is iconic. As a result, their bikes sell at a premium to those of their competitors. As I write this, Yahoo reports their yield as over 7%.
What you may not have realized is that Harley also sells a whole lot of parts, accessories, clothing, collectibles, etc. In the words of Fred Townsend, “Motorcylce owners just buy stuff. That’s what they do.” From what I can see, this general truth is even more true with the Harley-Davidson brand. How else can we explain the wide range of Harley branded products, or the fact that their “stuff stores” are in countless resort towns, and even airports?
But the business is more than just bikes. They have a huge financial services division that offers wholesale and retail financing, insurance, and more. What’s not to like? Well, a few things as it turns out. First is our spot in the economic cycle. For lots of owners, a Harley is not a gas-saving way to get to work, but a cash-consuming toy for the fair-weather weekends. When the economy was strong there were plenty of buyers. Now there are far less buyers for new bikes, and I can’t help but believe we’ll see a spike in used bikes on the market before this cycle ends.
I have to expect that the financing division–like so many u.S. lenders–will suffer some serious losses to borrower defaults. Naturally they’ll be writing less new loans as well. Less bikes sold = less insurance, no?
Finally, perhaps the most daunting part of the outlook is demographics. Simply put, their biggest group of buyers may be too old to buy new bikes in the near to mid future. Of course, if they can transplant the brand image to Asia, or to younger buyers here, all bets are off, but I’d like to see more evidence of that before I buy in.
In the interest of full disclosure, I own a Honda VTX 1800. It looks nice, has lots of power, and it cost a lot less than a Harley. My wife says that maybe she’ll upgrade me for my 50th birthday. Maybe my view here is only sour grapes.
So, investors or bikers, what have I missed? Or check out another opinion here.