Hedge fund trader says Harley likely to be takeover target

Will Milwaukee’s beloved Harley-Davidson Inc. be taken over by a larger publicly held corporation or investment firm in the next five years? A popular Chicago-based hedge fund trader thinks so.

As Harley’s brand – and sales – grow stronger and stronger, it will be pursued by giant consumer goods conglomerations and large private buyout groups, according to Jonathan Hoenig, managing member of Capitalistpig LLC.

Hoenig spoke about Harley’s stock in the "Cashin’ In" television show produced by the Fox News Channel and hosted by Terry Keenan.

In response to an e-mail question from a viewer in Florida on the June 26 "Cashin’ In" show, Keenan asked Hoenig about Harley’s future. Hoenig responded:

"It’s super strong, Terry. I would like to see – I like to bet on group movement. I don’t like to pick individual stocks. HDI is such an amazing company here. This is one of the most valuable brands, and I would be surprised if this was an independent company in the next five years. One of these companies is going – bigger companies, multinationals or some of the buyout firms will want to own this brand. And I think it’s not my top choice for new money, but if you own the stock, hang on for the ride, because this hog is going 100 miles per hour."

After the show, in a telephone interview with Small Business Times, Hoenig reiterated his belief that the Harley brand was "just too valuable" to remain independent.

"I think there are few companies where one really has an opportunity to buy a piece of Americana. It’s one of those unique brands. It is a piece of the American dream," Hoenig said.

"Understand, I have no inside information on this of any sort. But the history of the American automotive industry is one of consolidation. I think Harley is just too valuable of a brand," Hoenig said. "Overseas, a Harley-Davidson, a hog, really symbolizes America. There’s a history you can’t duplicate. I’d put it up there with Coca-Cola and McDonald’s as one of the most valuable American brands."

However, Hoenig’s prediction that Harley will be acquired by a multinational firm was disputed by another panelist on the Fox show, former television actor Wayne Rogers. Rogers, most famous for his role as "Trapper" on M*A*S*H*, is the founder of Wayne M. Rogers & Co., a Los Angeles-based investment management firm that provides capital for expansion to privately held companies and also invests in real estate.

In a telephone interview with Small Business Times, Rogers said, "I don’t agree with Jonathan on that. I’ve owned the (Harley) stock for a long time. I think there would be great resistance to that. Of course, a board of directors can be effectively bribed, although I wouldn’t want to use that word, but that’s what it is. It’s like the Green Bay Packers. Imagine trying to move the Green Bay Packers.

"It’s a terrific company. I think it’s a hell of a company," said Rogers, a graduate of Princeton University.

Of course, Harley’s history was not lost on Rogers. He noted that Harley indeed was purchased in 1969 by a multinational company, AMF Corp. AMF held the company and nearly ran it into the ground until 13 Harley executives reclaimed the company in a leveraged buyout and revived the brand.

Dagen McDowell, a Fox Business News analyst who also is a panelist on the "Cashin’ In" show, also disagreed with Hoenig, saying that every baby boomer who wants a Harley motorcycle eventually will own one, and when the market becomes saturated, supplies will go up, prices will come down, the company’s margins will be hurt and the stock will fall.

Harley’s stock, which trades with the HDI ticker symbol, is one of the key components of the Small Business Times’ BizTimes Stock Index. The company began the year at $47.53 and closed at $61.33 June 25, a 29.03 percent gain.

Rogers sees no reason why Harley’s brightest roads aren’t ahead, rather than behind.

"I think the future could even be bigger. You know, sooner or later, like Europe, we’re going to have to stop driving such big automobiles. You can go a long way on a tank of gas on a motorcycle," Rogers said.

Rogers said he also does not foresee a day when Harley, like many American manufacturers, ships its production overseas to capitalize on cheaper labor costs.

Hoenig agrees that Harley’s future is bright.

"I think this is a (stock) that could go 20 to 30 percent higher in fairly short order," Hoenig said.

Hoenig is a known market contrarian who, as a hedge fund trader, believes that timing is critical to building wealth, rather than staying the course with pat, stagnant portfolios.

"Investors who preach ‘buy and hold’ are kidding themselves. What the long haul speaks to isn’t the merits of stocks as an asset class, but the mathematical effects of compound interest over time," Hoenig said on his Web site. "There are over 13,000 publicly traded securities, and some people trade as if they thought it was their constitutional responsibility to have a position in as many as possible.

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