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Company: Harley-Davidson (HOG)
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243 votes

  Harley's dominance of product and brand name is insurmountable

Harley’s dominance of product and brand name is insurmountable. The company maintains an extremely strong franchise and durable competitive advantage.
. The company generates a lot of free cash flow and has a very high return on equity with reasonable debt levels.

Moreover, in Jan 2008, Harley issued 2008 guidance above the consensus estimates, so perhaps they are seeing something? We'll have to wait until late spring to get more information but I think that this may actually be something larger.

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23 votes

  Success internationally could fuel growth

International growth opportunities still afford the company room to expand and grow its bottom line over the long-term. In India, HOG has requested a reduction of the current tariffs to 10% and the ability to establish dealerships in the country, they got 1/2 of what they wanted. This is good news, not "great" but still very good. Great would have been getting both. HOG now has the ability to establish a dealer network in the country and while it may not sell tens of thousands of bikes there, it will begin to establish a presence and the brand. Due to the tariffs it will be a luxury item but, given the income disparity in the region, it is more than possible any drag on sales will be minimal as the vast majority of the population would not have been able to afford the bikes anyway.

Given the two choices, this one must be considered the better result. Establishing a network in the country is far better long term. Once there they can continue to lobby for tariff reductions and having the bikes in showrooms will boost sales to a middle class that otherwise may not have considered one.

Democrat Russ Feingold is pressuring the Indian government to dump "patently unfair" tariffs on Harley Davidson (HOG) motorcycles in the nation.

In February, Harley got the right to establish dealerships in the country that will at least bring down some of the costs and better entrench the brand.

Rather than shipping the bikes individually to buyers, they can bulk ship some and sell them there. A start.

"It would be a real confidence-builder (for U.S.-India business relations) if they would open the market up to a signature product from Wisconsin," Feingold said, speaking Friday from New Delhi.

Feingold argued that the removing the tariff would not hard India business as no one there produces heavyweight motorcycles. He then said that selling more would increase governmental revenues.

So, in India lowering the cost of business is good for the government but in the US Feingold consistently votes to increase it....irony. But, that is another post.

The good news on the whole subject was that Feingold said he was encouraged by the fact that other Indian officials described Indian prime minister Manmohan Singh, an economist and former finance minister, as someone who "has not been a big fan of tariffs."

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27 votes

  HOG preserves prices and premium image during US economic downturn

While Harley Davidson's competitors in the US motorcycle market have aggressively cut prices in order to prop-up their sales, HOG has instead cut their production and left their prices unchanged. As a result, Harley has been losing market share over the first six months of 2008. While this may reduce HOG's profits in the short term, it will allow the company to achieve better margins on its current sales as well as preserve the premium reputation of Harley Davidson motorcycles in the long-run, thereby protecting HOG's ability to sell at premium prices and realize strong margins.[1]

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0 votes

  Business adjustments meet financial environment

Within the last two years, Harley Davidson has taken efforts to adjust to the economic downturn. Harley Davidson has reduced inventories in response to dwindling sales, has restructured operations so as to meet these decreases, and has managed to maintain positive cash from from operations. These efforts poise Harley for long-term growth.

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0 votes

  Warren Buffett believes in HD

Warren Buffett recently invested upwards of $300 million in HD. This alone is a strong indication of HD's durable competitive advantage and strong potential to rebound when the economy improves.

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6 votes

  Better mileage than a hybrid, but makes you look cool

As gas approaches $4 a gallon, are consumers going to switch to two wheels to save money? It would seem early results are... yes. The questions was posed to an Illinois Harley Dealer recently. Shad Zimbro, co-owner of Black Diamond Harley Davidson (HOG) in Marion, Illinois says, "It really is the truth because they do save a lot of money in gas by going to a motorcycle." He says his sales have doubled since last year.

Motorcycles tend to average about 50 miles a gallon and Harley makes models that get 70. Zimbro says he commutes 40 miles a day to work on his Harley and saves about $100 a week by doing so. It does make perfect sense, but obviously we need more data to see if it is just a regional trend or a larger one. The significance of this increase though, is impressive and that does lead me to believe it may be more than a local event.

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