Thursday, May 07, 2009

Harley-Davidson: +140%; Winnebago: +170%

The chart above (click to enlarge) shows the two-month returns for Harley-Davidson and Winnebago, compared to the S&P500 Index, from March 9 through today (May 7). The S&P500 Index is up by 35% since early March, but Harley Davidson is up by almost 140% (4 times the S&P500 return) and Winnebago is up by about 170% (almost 5 times the S&P500 return).

Bottom Line: If the stock prices of companies like Harley-Davidson and Winnebago selling luxury, discretionary items like $35,000 motorcycles (pictured above) and $140,000 RVs (see picture above) are rebounding by +100% over a two-month period, at 4-5 times the increase in the S&P500 Index, does that suggest that the recession must be over?

HT: Comment by LaDolceVita about Thor Industries.


At 5/07/2009 10:40 PM, Blogger Hot Sam said...

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At 5/07/2009 11:01 PM, Blogger Captain Capitalism said...

I don't know Mark. I'm seeing too many sucker rallies. GDP contracted at 6.1%. Unemploymnet hasn't slowed down. And I think there's an inherent bias in the market to look for a reason to buy. TOo many people vested in a 401k and increasing asset prices as a means to retire. People want prices to increase ergo a self-fulfulling prophecy.

What I would love to see is macro-economic data that suggesting the end is near.

At 5/08/2009 12:45 AM, Anonymous Anonymous said...

How's this for a brief overview of the macroeconomic data suggesting a turnaround is not only near, it's already here (courtesy of Scott Grannis over at Calafia Beach Pundit):

"The rally has been driven by a steady stream of better-than-expected news. Commodities are up, global shipping rates and volumes are up, manufacturing surveys show improvement, consumer spending has bounced, credit spreads have narrowed, unemployment claims have stopped rising, volatility has declined, the banking system is surviving, some companies are reporting strong profits, housing prices seem to be bottoming, and home builders' stocks are up almost 90% from their lows despite the fact that residential construction in March fell to an all-time low of 2.7% of GDP, to name just a few of the positive surprises."

Or how about this, courtesy of Eldon Mast at The Good News Economist?

"10 Large Retailers: Q1 Stronger than Expected

You've consistently read here that retail consumers are renewing their propensity to buy in 2009. Yesterday's same-store results represented the strongest evidence yet. Here is a list of 10 top retailers that essentially said, "Our Q1 was much stronger than we originally expected."

1. Wal-Mart(WMT) said U.S. monthly sales at stores open at least a year was up 5 percent. The average analyst estimate was for 2.9 percent increase. Demand was not just driven by necessity buying. The firm said strong sales were boosted by discretionary items such as entertainment and home goods. These indications dispel any notion that Wal-Mart is only doing well because spenders are stocking up on necessities. Since January Wal-Mart sales continue to skyrocket.

2. Target(TGT) also said its monthly sales rose in line with analysts' views. But for the whole quarter it now expects its profit to be "well above" the 52 cents per share consensus estimates. Those profits it said were driven by better than expected results at its stores throughout the quarter.

3. The Gap(GPS) also gave surprise profit guidance on Thursday. It plans a first-quarter profit of 29 cents to 30 cents per share, well above analysts' estimates of 24 cents.

4. BJ Wholesalers(BJ) also raised guidance. "Based on higher than expected merchandise sales and margins for the first three months of the fiscal year, the company now expects to report earnings per diluted share in the range of $0.41 to $0.45 for the first quarter. Previous guidance was in the range of $0.29 to $0.33 per diluted share."

5. J.C. Penney(JCP) raised its quarterly view for the third time in less than a month. The company now anticipates earnings for the first quarter to range between $0.09 and $0.11 per share. Analysts were estimating the company to earn only $0.02 per share.

6. Kohl's(KSS) also raised its quarterly forecast. Until Thursday analyst expected a $0.35 per share profit. The firm raised that outlook to $0.43 - $0.44 per share. CEO Kevin Mansell said, "Sales results for April exceeded our expectations. Childrens outperformed the Company from a line-of-business perspective and the Southwest was our strongest performing region."

7. The TJX Companies(TJX) (TJMaxx and Marshalls) reported sales for the month of April were up 1% from the same period last year. Their same store sales rose 3%. With above-plan sales in April following February and March sales which also exceeded plan, as well as strong merchandise margins, the firms said it now expects profit of $0.47-$0.49 per share up from their previous guidance of a $0.32-$0.38 range.

8. For drugstore chain Walgreens(WAG), "Most of us think the worst-case scenario we did in our planning is probably off the table," said Gregory Wasson, CEO. His firm posted a 5.7% increase April same-store sales.

Some of the best news on Thursday came from teen retailers:

9. Aeropostale(ARO), which has an aggressive discounting strategy, said its same-store sales rose 20% in April.

10. And Buckle(BKE) has now posted 21 consecutive months of double-digit same-store sales gains. The firm reported a 18.2% increase in sales for April.

In total, April sales rose an unexpected 1.2%, the biggest gain since last August. That compared to a gloomy analysts' forecast for a 0.2% decline.

This retail data combined with the ISM reports signals recovery clearly underway."

For what it's worth, I hope investors keep betting against the recovery. The more shorts we can squeeze, the quicker I can make up my losses!

At 5/08/2009 7:18 AM, Blogger PFCT said...

I'm not sure I'd make so much of motorcycle sales holding up - they are cheaper than cars.

Besides, Roubini keeps telling us we're suckers for being in the stock market and things will get worse. Shouldn't I listen to him?!

At 5/08/2009 9:08 AM, Blogger ExtremeHobo said...

Keep in mind the stock market is not indicative of today's economy but instead looks forward to what the expected market will be in 6 to 9 months.

I actually saw (about 2 years ago when this mess was getting started) that Winnebago is a really good indicator of the economy, when Winnebago is hurting, our economy is hurting, and vice versa. Nice that its finally moving up!!

Also, I don't believe in the existence of a sucker rally. Will the bank not cash my check because my money was made in a "sucker rally" and not a bull rally?

At 5/08/2009 9:28 AM, Anonymous AMATI NONYMUS said...

last man standing in the RV industry. Their stock is going up on the expected profits from their monopoly position. In short, the stock was bargain priced.

Harley stock is going up following a huge sale of senior unsecured debt to Berkshire-Hathaway and Davis which solved the company's liquidity problem. The company is cutting 1100 jobs. The willingness to buy Harleys isn't the problem - financing them is the problem.

Berkshire and Davis are the largest shareholders in Harley, so they just loaned themselves money.
~~Robert Miller~
Would you guess that brilliant Chinese Bankers sold off all the Tea-Bonds in China in time to roll bond proceeds into calls on motorcycle and Winnebago stock? Did they then buy up the underlying stock to pump up price of calls long enough to dump calls trading them for puts? They are now sipping on Vintage hot tea, and licking up dough-nuts aged to perfection for nine years. Now they will put in orders to sell the underlying securities then put in limit orders to sell puts when they reach astronomical levels of value. And when the last American motorcycle company files for chapter 11 same Chinese will buy up the last hogs coming off the assembly line. What collector's items they will have to sell for big profit
It's a wonderful world.
~~Jimmy Stewart~

At 5/08/2009 9:43 AM, Blogger Hot Sam said...

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At 5/08/2009 10:17 AM, Blogger ExtremeHobo said...

Well any time you buy low and sell high you make money, regardless of time period. You would have to be quite illogical to not buy stocks just because the rally wont last forever.

And every long-term rally begins with people calling "BEAR RALLY!" before they realize that it hasnt stopped and they missed out on the money train, TOOT TOOT

At 5/08/2009 11:00 AM, Anonymous Anonymous said...

Mr. Miller,

Just as there may be "newspaper articles...filled with 'turned a corner' rhetoric which proved myopic" during sucker rallies, so, too, are there newspaper articles portending certain financial armageddon at market bottoms. I would contend we saw that at the beginning of March.

You claim to be an economist in your user profile. Surely you're aware that all it takes is for things to go from pitch black - which is where we were in early March - to a lighter shade of black - which is where we are today - for the markets to start to turn around.

You should also know, as an economist, that economies pull out of recessions after the weak companies are weeded out. So when you contend that businesses are doing well only because their competitors are dying off, you're actually saying the economy is healing itself and things are getting better.

Based on today's employment numbers, plus the numerous other data (and I can provide plenty more) I outlined in my previous comment, I wouldn't be at all surprised if the recession is already over. Again, being an economist, you know that recessions typically end 1-2 months of unemployment topping out. When did it top out again? Two months ago.

The market climbed very quickly in a short amount of time. We'll probably see a sharp, quick your DD and consider buying on that dip before the next leg up.

At 5/08/2009 10:08 PM, Blogger Hot Sam said...

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At 5/09/2009 3:40 AM, Blogger Shawn said...

where *is* this inflation, that's what I'm baffled on. (sorry for OT here)...are banks just shoring up abysmal capital stock? fed selling bonds like crazy?

whar's the dollas?


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