Tuesday, January 12, 2010

BAGAKOAA Jan 12, 2010 Harley, Vegas and The Road Ahead


Jan 12, 2010 Harley, Vegas and The Road Ahead

Had a great lunch today with a bunch of great guys. They are our fearless sales force for PADI here in North and South America. I have known many of them for 15 years. They are at, what we call the pointy end of the stick. Some of us talked about stocks today so they have been invited to join here in the land of Salve Lurcum. Because they are employees I had to make them swear an oath that I am a moron when it comes to investing and that anything they read here is complete bullocks and should not be used for investment strategies or trades. Most would agree I am a moron and left it at that.

One was bragging about owning Harley, the stock not the bike although they have had Harley’s and still might own one. At this point in time, I’d say owning the bike is a better wager than owning the stock. It’s current PE is 24 and forward looking price to earning is an obscene 37. Almost all analysts have a hold or lower rating on the stock except for Argus who even though they have lowered their 09 and 2010 earning estimates, at the new lowered 2010 earnings estimate of 1.28 a share and the current P/E, you got a 30.00 stock. Their reasoning seems sound. First off the better economic climate should help sales. HOG did slash the hell out of expenses. They also abandoned their planned move from PA to KY when the PA union took concession that will save the company some serious dough. (An estimated 100 million to be exact.) They are also dropping the Buel and Augusta product line to focus on HOG products. They will probably be able to pay off their long term debt in 3-4 years out of free cash and income, but I still think the stock is too rich at multiples of 24+. I will put it on a watch list, and might scope out some April calls, but the dividend is an anemic 1.8% yield. I’ll pass.

Another was saying they owned Las Vegas Sands. Having spent 13 years there one night, I have watched and invested in many of the Vegas stocks. I traveled sideways with LVS earlier this year trying to time the good news about the gaming license in Macau. That did not work out well for me as I bough at 9ish and sold at 9ish and missed the double to the current 18. Let’s look at the value. Ned Davis and Argus love the stock. Because of their recent loss, you can’t make a P/E ratio work. The Sands company primary profit engine is the Venetian and that is due to the tie in to the convention properties. Sheldon Adelson does not make too many mistakes and like Kikorian and Wynn are masters of the strip at making money. As the economy recovers and rack rates continue to improve, the Palazzo should be on par with the Venetian as very profitable properties. On the down side, the company has about 12 billion with a B betting on the Asia market. The company did over extend and did a huge offering in 09 which has taken the stock down from 100 a share area to its current price of about 18 a share. It looks as though the analysts are pricing in the “if come line” on the IPOs in Macau. The hopes are as far as I can see is that the Sands China IPO in the next couple months will generate 2.5-3 billion in cash. I am thinking that there are a lot of Ifs built into that value. If I had held onto my 9 dollar Sands, I’d take 9 dollars off the table and play with the house money.

We did have a couple of relevant Upgrades and Downgrades today. I call them relevant because they are in one of the portfolios or ones I know you have.

MGM Mirage got a nod upward from Goldman saying the worst is over so come on back to Vegas.

AVON got kicked around a bit by UBS. I know none of you have AVON stock but I know one of you who has about 3220 AVON Bottles. You know those hideous little bottles of toilette water that look like cars or guns or flowers. Imagine having 3,000 of them. Scary. I am not worried as I know this person never reads page two of my blog.

GME, Gamestop got bumped at Credit Suisse to a new target price of 28. I need that as this stock is getting trounced because of the WMT factor. I am looking for 32-35 on this stock.

Speak of the Devil, LVS got upgraded by Goldman saying the shares should be trading at high multiples. Forward looking multiple is high. They did not give a target price.

And in a trifecta of casino plays, Wynn got upgraded by Goldman. They gave a new target price of 64.00 which is weird because the stock is trading for 67.00. If that is an upgrade then what is a downgrade. The analyst must be a contrarian.

Salve Lucrum


Post a Comment

<< Home