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Strategies & Market Trends : Mr. Pink's Picks: selected event-driven value investments -- Ignore unavailable to you. Want to Upgrade?

To: ayn rand who wrote (16308)	2/12/2002 1:41:33 PM
From: Peter V	Read Replies (1) \| Respond to of 18998

Happy day for HDI shorts. If I had known that article was coming I would have doubled down yesterday. But I have some August puts, hopefully this is just the beginning. CBS Marketwatch jumps on the bandwagon ... marketwatch.com{56B99376-B54D-4E5D-A5B3-50CDE0F5432A}&siteid=yhoo Harley has rare rough day on Street Published report airs short-seller arguments By William Spain, CBS.MarketWatch.com Last Update: 12:35 PM ET Feb. 12, 2002 MILWAUKEE (CBS.MW) - Harley-Davidson has been having a rare rough day on Wall Street following a published report that questioned both some of the motorcycle maker's financial disclosures and the potential for sustaining it torrid growth rates. Shares in Harley (HDI: news, chart, profile) were giving up $3.71, or almost 7 percent, to $50.32 in midday action, dragged down by a Wall Street Journal article heavy on bearish analysis. Prior to today's session, the stock was up 31 percent over the last year and hit a 52-week high of $57.25 just weeks ago. A high multiple and a supposed surfeit of inventory on the dealer floor (giving the lie to the cherished belief that the company can immediately sell as many bikes as it can make) are two of the issues raised in the piece. Far more damaging, however, in the post-Enron era were veiled accusations of squirrelly accounting at the company's financing arm. Harley sells the loans it makes to outside investors, calculating the gains on estimates of how they will eventually perform, but does not break them down in its financial filings. A well-known short-seller of Harley stock claimed in the story that the gains it makes from the loans accounted for about 5 percent of the company's EPS in the second half of 2001 and that it would have missed Street expectations without them. Joe Yurman, a Bear Stearns analyst who maintains a "buy" rating and $60-$62 price target, agrees that there is a need for more specific disclosure from Harley. At the same time, however, he pointed out that the financing business comprises less than 2 percent of the company's total operating income - and that it has substantially increased the percentage of purchases financed without any meaningful uptick in delinquencies or write-offs. "We would expect the stock to sell-off on this, as bears will likely focus on the lack of transparency of the [financing] business, particularly acute during this crisis in confidence with corporate governance in general," he said, as he strongly emphasized his belief that Harley is not hiding anything. While dealer inventories have indeed increased, any pile-up in the showrooms due to a combination of factors, including seasonal softness in sales - motorcycles are unusable in much of the country right now - and planned production boosts. "The company has increased production capacity to narrow the spread that dealers are charging above MSRP and mitigating the likelihood of a lost sale," Yurman said. More important, "every dealer we speak with believes that he can sell any bike he gets." Ultimately, "the timing of this article is consistent with our belief that as we move into slower winter months, such bearish anecdotes would begin to pop up as many look to fill in the information void between reporting periods."