Harley Davidson Cruising towards High Growth

Today's Winner : Harley Davidson (HOG)

About the Company:

Harley-Davidson is an American motorcycle manufacturer with wide International Fan base. The company operates in two segments: Motorcycles and Related Products and Financial Services. The Motorcycles segment designs, manufactures and sells heavyweight touring, custom and performance motorcycles as well as a complete line of motorcycle parts, accessories and general merchandise. The Financial Services is engaged in the business of financing and servicing wholesale inventory receivables and consumer retail installment sales contracts (primarily motorcycles).


Analysis


One of the Sectors that turn around coming out of Recession is Automobile Manufacturing especially the luxury segment. Harley sales was very negatively impacted during the recession that lasted officially around 1 year and 9 months .During that period Harley held up well by launching targeted models and distribution in Asia where two wheeler was welcome whatever economic conditions existed during the recession. In fact recession did not exist technically in China, India and some parts of Asia due to internal consumption keeping their Economic Engines well oiled.
Harley recently launched some interesting model in India. The company launched 5 Harley Davidson models which will be available in the Indian market from 2011 onwards. The models announced are - Night Rod Special,Fat Boy, customized model Legend Harley and Roadster. In countries like India, the two wheelers are a day of life versus in America its still a hobby for most.


Even though the price tag is high for most of Indians, there seems to be increased interest in high level car segments which was considered non affordable by many Indians in the last decade. In short launching to new and enormous markets like India and China would benefit American Companies to weather future recessions with ease. Pepsi, Coke and McDonald are some clear winners of Global Diversification..

One year chart for Harley-Davidson

You can see that we lost a Great opportunity to catch the Stock during peak of recession in 2009. The stock price has grown almost 400% from its lows in 2009, due to increasing revenue and sales .


Lets us recent earnings and valuation

Name	P/E	P/E	PEG	1 Year EPS Growth Rate	Next 3-5 yrs EPS Growth Rate
Automobiles Industry	13.9x	62.7x	0.0x	-24.5%	-18.6%
Consumer Goods Sector	19.9x	25.0x	-0.04x	2.8%	12.3%
Hog	35.8x	18.4x	1.31x	94.6%	-26.9%
S&P 500	19.4x	14.8x	-0.32x	22.1%	8.2%

Looks like the Stock price is still way undervalued compared to rest of the industry. With a Forward PE far below the current Industry valuation. Let us look at the recent earnings report versus consensus.


HOG reported 3rd qtr 2010 earnings of $0.40 per share on 10/19/10. This beat the $0.35 consensus of the 9 analysts covering the company.


The stock price adjusted almost 20% upwards placing it comfortably above the Support line. The consensus for the current quarter is 0.55c to high estimate of 0.60c . I think the company would be able to meet the consensus or even beat it, as the Automobile sector posted some good numbers last few quarters signaling economic turnaround.


With increased presence abroad and keeping the future turnaround in consumer confidence and spending, American flagship brands like Harley will be a big winner..


My Target price for Harley-Davidson is $60 by next quarter or end of the Year.


Please comment ,it helps us to see different viewpoints.




Happy Investing and Happy Riding

Netflix - Buy or Sell - Earnings Today

Netflix before and after Earning

Today's winner : NFLX !!!

About the Company:
Netflix, Inc. provides online movie rental subscription services in the United States. The company offers its subscribers access to a library of movie, television, and other filmed entertainment titles on digital versatile disc (DVD).

Analysis

Netflix online has been a major competitor to Movie Rentals like BlockBuster for many years.. Netflix has carved itself a monopoly space among online rentals where companies can take market shares just by word of mouth.

Netflix really launched itself when they switched from traditional DVD shipping business to Download movie business using Media players and Gaming Machines (PS3, XBOX,WII) . Its not until they launched into this domain that the stock price skyrocketed to triple digits gains.

One of the areas of concern is that the company recently announced on its blog a few new developments that could be of interest to customers. Most recently, Director of Product Management Jamie Odell chimed in to inform that users will no longer be able to add movies to their DVD queue from streaming devices. As far as we know, the functionality has only been available on a few platforms, but if you're apt to do all or most of your queue management then it could be an issue, if you only use the website then everything will be the same. 

The Stock price nearly tripled starting around 2009 to post triple digits gains due to failures by BlockBuster, Walmart etc. So we should think about what is the real driver for this stock now...I would say Smart Phone based users will be the primary customers in near future , with Verizon and Apple posting Good results . We do have a major Mobile media provider going forward. One thing that the Netflix lacks is the International Subscribers restricting users from abroad to subscribe due to copyright issues.

The Stock performance for One year is given Below.

You can see that the Netflix has been consitently bouncing off the 50 Day moving average, but the overall trend is up.. Going by the pattern we are due for another bounce from 50 MA , but also keep in mind that any major news or earning disappointment will breach the pattern towards a 40$ drop..

I see this as a consolidation pattern going forward...

Lets see how they did in the last Quarter

NFLX reported 3rd qtr 2010 earnings of $0.70 per share on 10/20/10. This missed the $0.71 consensus of the 28 analysts covering the company.

But when news hit the wire, stock was already trading at a 52 week high which is a very bad entry point for small investors..

Now lets see the consensus

Not changed from last quarter, its again $0.71 which is pretty lame considering that the Holiday season and winter are when people watch lots of movies from Home (I do it too by the way).

But still NFLX is high PE , high Beta stock which bring very high risk on both sides.. If they beat the estimates and post a good forward guidance you might see the Stock popping $10 tomorrow to $195.

If they just meet the estimates or Disappoint you see the stock dropping to $155 ..

So I suggest open your position two days after the earnings report and the good entry point will be around $178 if the stock price settles above the 50 MA .

Happy Investing

Gold Prices: Gold Skims 10-Week Low as Safe-Haven Bid Evaporates - CNBC

Gold Prices: Gold Skims 10-Week Low as Safe-Haven Bid Evaporates - CNBC

http://www.cnbc.com/id/41245032

Widespread Gold ETF selling and Inflation news from India, UK GDP will cause U.S dollar and assets traded in the Currency to loose value...Another Great case for Gold Price fall.

The best place to be in world would be in U.S stocks especially Cyclicals,Technology and Consumer Staples.

Yahoo before and after Earnings

Today's winner : YAHOO !!!

About the Company:

Yahoo! Inc. provides online properties and services to users; and marketing services to advertisers worldwide.


Analysis


Yahoo has been seriously competing with google on the Ad revenues. Eventhough their Search Engine performance has improved vastly on tie ups with Google and other Search engines. Yahoo has been one of the best content providers there is , in my opinion better than all other players out there  especially presentation of content .


Let us do a Technical Analysis of the  Company stock 


Current Price as of Close 01/24/2011  is 16.09 $


Lets look at the Current Valuation 

YHOO	Industry Average	Percentile in Industry
Market Capitalization	$20.81B	$5.63B	98th
Beta (1 Year Annualized)	0.09	1.28	29th
EPS (Adjusted,09/30/2010 TTM)	$0.77	$13.90	87th
Current Consensus EPS Estimate	$0.22	--	--
EPS Growth (TTM vs. Prior TTM)	755.56%	+77.57%	98th
P/E (TTM) AS OF 01/21/2011	20.73	34.22	72nd
Dividend Yield (Annual) AS OF --	--	2.65%	--
Total Revenue (TTM) AS OF 09/30/2010	$6.53B	$16.51B	99th
Revenue Growth (TTM vs Prior TTM)	-0.05%	+25.00%	35th

Current PE is quite below the market average , so on the first look the stock is undervalued..


Lets look at the last Quarter earnings Report
Consensus : 0.15c    versus  Actual :  0.29c on Quarter ending October 2010


Here is the stock performance based on the earnings and other factors










the stock actually went up close 20 % and retraced back to October price range...


The  current consensus estimate for Tuesday's earnings report seems pretty low,  0.22c  , considering the fact that the Holiday sales for online retailers like Amazon  posted enormous gains  and increased traffic leading to higher Ad revenues .  The Ad Revenues must have grown many fold  than the previous recession years..


This is my prediction based on the current valuation and Yahoo possibly beating the low estimates


If they beat by 5c to 10c above consensus  -  Stock price will be around 17.5$


If they Beat twice the consensus like last time - Stock price might zoom past 18$


If they equal or come under the estimates (which is very rare) - Stock price might drop to $14.5 or lower..


 Yahoo is definitely  a Winner Tomorrow ...

Where is Gold Headed from here?

Today's winner - Gold sellers (Seriously)

Gold has been hedge for many investors against Global Economic and Currency devaluation for past few decades.  In fact Gold hit a peak during Oil Crisis of 70's and 80's and also during the First Iraq war causing massive oil disruption in the Middle East...

Here is a one year chart on Gold




You can see that current 15% spike in Gold was caused by Greece and Portugal going belly up on their external debts and inability to Borrow. If you breakdown the 15 % rise , its influenced by many factors.

1,  The Devaluation of Euro currency -              Gold spike 4%
2,   U.S government issuing more Debt  -          Gold  Spike 2%
3, The Inflation in China                         -          Gold Spike  2%
4,  the Inflation in India (around 23 %)   -          Gold Spike  1%
5,  Gold ETF's coming onboard across the world (especially in India and China) - 6%

The above issues fed into each other and caused the recent currency meltdown woes.  Silver is still not in parity with Gold over many years because of its Higher  liquidity and it's Reputation as an Industrial Metal rather than metal of Ornamental value.

 Gold spike has been caused by Retirement funds, Investors buying the Gold ETF's when they rushed out stock meltdown.  The Inverse correlation of Stock market and Gold ETF does not apply here because whoemever bought Gold ETF's did not dump it until now and they also kept on buying Stocks.. But there is only so much Gold in the world and most of it is in the private Hands (especially in India, China and Africa).

Lets treat Gold as investment instrument or a Company stock,rather than a metal with an Glittering value..Here is where its headed in next few months when investors or shunning hedge instruments and heading 100% to World Equity stocks..

You can see that Gold cracked through the crucial 50 day average recently and heading towards the 200 day average of 1250$/ounce  ...If technicals are correct you might see a bounce on 1250$ and consolidation..if it fails there and you see more positive economic indicators like Job numbers and Consumer spending we will the Gold has nowhere to go except down ..The next stop would be around 1150$...  if it touches that prices i would be buyer ...Will you?