Harry Dent on HOG
Hi Guys this is the latest post from HS Dent, considering the trades we are running this month I thought it quite relevant.
Harley Davidson and 40-Something White Men
Posted: 21 Jul 2010 08:23 AM PDT
Anyone who has seen Harry Dent speak has no doubt seen his “Male Midlife Crisis” slide. It’s a slide that charts large “Harley-type” motorcycle purchases by age. Not shockingly, the chart has a massive spike in the early 40s and then falls off a cliff thereafter.
HS Dent has used Harley as an example of a company whose profits are driven almost entirely by demographics. It is a product purchased by relatively high-income, early middle-aged white men and pretty much no one else. Not surprisingly, Harley had an incredible run in the 1990s and early 2000s. Baby Boomer men were in their peak chopper-buying years. But by now, the bulk of the Boomers are past that stage. The company is facing a shortage of 40-something white men.
If you happened to catch today’s paper, you might have seen that Harley reported its earnings yesterday. Earnings were actually up to $0.30 per share, quickly sending the share price 13% higher.
So what happened? Are younger consumers buying bikes? Are women suddenly falling in love with chrome, leather, and loud engines? Not quite.
Investors should have read the earnings release a little closer. Harley’s earnings improvement was due almost entirely to its financial services arm. Harley’s domestic motorcycle sales were actually down 8.4% over last year’s number, and let us not forget that last year’s sales were already quite depressed.
Nothing against Harley, of course. It’s a great company that makes an iconic product. But unfortunately, Harley is on the wrong side of a major macro demographic trend.
Charles Lewis Sizemore, CFA
Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy.
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