Sunday, November 20, 2016

Psst... Wanna' buy some HOG PII?

Links to motorcycle stocks mentioned below

Harley Davidson (NYSE: HOG)

Victory, Indian (NYSE: PII)

Ducati (Volkswagen AG Frankfurt ETR: VOW3)
  • Volkswagen ADR OTCMKTS: VLKAY

BMW AG (Frankfurt ETR: BMW)

Honda (Tokyo: 7267)
  • Honda sponsored ADR (NYSE: HMC)

Suzuki (Tokyo: 6785)

Yamaha (Tokyo: 7272)

Kawasaki Heavy Industries (Tokyo: 7012)

As the year winds down, and people focus on happy moments like Thanksgiving, Christmas, and New Year’s Eve, you might want to spare a thought for something else on the horizon: tax time.

If, like me, you have a self-directed IRA, that might mean you’re about to convert saved cash into equities. And if you’re a motorcyclist, you may want to buy some motorcycle stock. The last year started off pretty poorly for the two big American motorcycle companies, Harley Davidson (NYSE: HOG) and Polaris Industries (NYSE: PII), the maker of Victory and Indian. However as of this writing Harley-Davidson’s shares have staged a pretty strong recovery.

A year ago, HOG was trading at around $48 per share. It’s now at well over $57, having returned over 18%--roughly double the return of the Dow Jones Industrial Average. Pretty impressive, especially considering The Motor Company's lackluster sales results. Even beleaguered Polaris has had a strong month or two, clawing its way back to around $85 from a low of $75.

Most of my self-directed IRA holdings are in accounts at TD Ameritrade, which offers an easy and intuitive trading platform. The downside is that it’s pretty much limited to equities trading on U.S. exchanges. That makes it difficult to invest in the other major motorcycle manufacturers—but not impossible.

Quite a few foreign motorcycle manufacturers’ shares are traded in the U.S. in the form of American Depository Receipts. That’s to say, shares in those companies are initially purchased on foreign exchanges, and then traded on U.S. exchanges or over-the-counter. 

There are two kinds of ADRs--sponsored and unsponsored. In a sponsored one, the company itself acts as the agent; it's a way for foreign companies to have easier access to the U.S. capital pool. If some other agent--e.g. and investment bank--just buys shares on a foreign exchange and then trades the receipts in the U.S., that's an unsponsored ADR. 

Some ADRs track the underlying company’s share prices almost perfectly, but others are not particularly liquid. If you prefer to invest directly, you can use Fidelity to trade on Japanese and European exchanges. There are pluses and minuses to each approach--you'll have to research tax implications and fees and decide what's best for you.

To invest in Ducati, you need to buy shares in Volkswagen (Ducati’s parent company.) Ducati represents a trivial percentage of VW’s business though, so your investment is really in a huge car company (and one which, by the way, has a cloud over its head at the moment.) Volkswagen trades on the Frankfurt exchange and is currently about in the middle of its range for the year.

Motorcycles represent a larger percentage of BMW’s business, but BMW still sells at least 10 cars for every bike. BMW also trades on the Frankfurt exchange and Xetra. BMW shares are well down from a high of over 100EUR a year ago, though prices have recovered somewhat in the third and fourth quarters (so far). BMW's ADRs each represent 1/3 of an underlying share.

Honda shares have lost 25% of their value in the last year, and the venerable company’s three-year chart’s not much better. But Ford Equity Research just put out a report rating HMC a ‘strong buy’. I believe Honda’s year end is in June, so if this report is solid, and Honda’s year looks good as of next summer, this might actually be a good time to buy.

Suzuki’s recent year has been forgettable, but pull back and look at the company’s five-year chart and you’ll see a reasonable return to form. Stock trades on the Tokyo exchange and with over-the-counter here in the U.S. as SZKMY; each receipt is for four of the underlying shares. I’m not crazy about the U.S. ADRs; I've been put off by large differences between bid and ask prices which makes me think there's a liquidity problem. But, that’s just me. 

I see Suzuki as one of the companies best positioned for increasing sales in the developing world—personally I’d just pay the higher fees to buy it in Tokyo, rather than here in the U.S. (By contrast, I have no problem owning Honda’s ADRs, which trade on the New York Stock Exchange.)

There are two different Yamaha companies: Yamaha Motor Corp. (Tokyo: 7272) and Yamaha Corp. (Tokyo 7951). It would be easy to buy the wrong one! Yamaha Motor Corp., like Suzuki, looks better when you take a longer view. ADRs trade over the counter as YAMHF. Not much of this trade in the U.S.--only a few hundred shares on a typical day. And, although it dropped below the general market's return earlier in 2016, it's done quite a bit better than the market as a whole so far this year.

Last but not least, Kawasaki Heavy Industries relies on motorcycles (and related products, such as quads and watercraft) for about one-fifth of its revenues. It’s number 7012 on the Tokyo Stock Exchange, and ADRs trade here as KWHIY. It’s been a crappy last two or three years for Kawasaki investors; you would have been far better off just buying a motorcycle in the spring of 2015, since the stock’s lost about half its value since then.

That said, some investors see the big K as a long-term strategic investment. You can buy it now at something close to it’s three-year minimum so if you really believe in the company, it’s not a crazy play.

As a motorcyclist, have you invested in any particular motorcycle companies? If so, which ones and why? Tell me in the comments!


  1. What about KTM? They're the one that has intrigued me.

  2. Dave, that's a great question. KTM's parent company Cross Industries, repurchased and reissued all its shares last spring. KTM Industries AG shares now trade on the Vienna, and Swiss, exchanges. The last Annual Report is pretty damned impressive, for a (relatively) small company. I'll do some research into the current ease or difficulty of acquiring shares, from the perspective of an American investor.

  3. The last time I looked at HOG (which was some time ago) a big part of their revenue came from their finance arm. Assuming they still have a finance arm, if they can convince people to continue to buy their product, rising interest rates could be a good thing for them. Akthough, ultimately I think demographics are a problem for all bike manufacturers, a Trump (or any other) stimulus program (read infrastructure plan) could short term put money in the pockets of a lot of potential Harley buyers.