At times, it can be tough to filter through the noise in the stock market.
Noise comes in so many different forms.
Investors can make noise out of the smallest news nugget, or downplay a more impactful item.
A company itself can create noise for its stock by not giving complete details, or by leaving key items out of a conference call. It spirals into different interpretations and creates a noisy stock price.
Navigating a noisy market and figuring out what has actual implications is a difficult task.
However, this is a task I enjoy. It’s my passion to filter through every aspect of the market and figure out how to profit.
I have one opportunity for you today that comes with a lot of noise. But don’t worry, I’ll filter through it for you today, and you’ll see why this is an excellent opportunity right now.
An Iconic American Brand
As I mentioned, there are various types of noise in the market that move stock prices.
Our focus today is on social media, specifically President Donald Trump’s Twitter account.
He is not known to be shy, sending many tweets in knee-jerk fashion.
And the stock market reacts.
The latest example is Trump’s Twitter tirade on iconic American brand Harley-Davidson Inc. (NYSE: HOG).
Before I give you the details in case you missed out on the lashing, I wanted to point out that this isn’t Trump’s first Twitter attack.
He has went after numerous companies that didn’t see eye-to-eye with him. He focused on Amazon.com Inc. (Nasdaq: AMZN) for several days before moving on. Then Facebook Inc. (Nasdaq: FB) and other media companies.
It’s important to point out that most companies he targets see a negative price action initially, falling multiple percent in quick fashion.
But when the dust settles from the Twitter chaos, share prices rebound, and the stocks continue higher as if Trump never threatened the company.
This is a pattern we can exploit with Harley-Davidson, but there’s a bit more to this trade — Harley-Davidson is making the right moves.
Since Trump’s Twitter power is only a short-lived noisemaker, let’s look at the opportunity with Harley-Davidson.
The Tariff Game
Trump’s focus on Harley-Davidson stems from the company’s announcement that it plans to shift some manufacturing to Europe. The company has stated the move is to avoid the stiff tariffs the European Union is imposing in response to Trump’s trade policy.
Trump feels like Harley-Davidson is quitting on America, and he threatened to tax it like never before.
By the way, similar threats were made to other companies, with time and time again showing that Trump’s bark is louder than his bite.
The reality of the situation is that Trump wants to play the tariff game.
Well, this is how tariffs work.
Companies are going to seek the cheapest way to produce and sell their items. As countries announce retaliatory trade tariffs in response to ours, there are going to be changes that have to be made.
Such as Harley-Davidson following its target growth market: international markets.
Yes, Harley-Davidson is an iconic American brand and had yet to manufacture overseas. But with growth in the U.S. peaking for the company amid a struggle to attract the next generation of riders, focus has shifted to the enormous growth potential that exists outside of America.
Europe, by the way, is its second-largest consumer market. The company is set to expand throughout Asia as well to find growth and help balance out the company’s operations.
And Trump’s Twitter spat could signal a bottom for the stock. Let me explain…
Now’s the Time to Buy
Harley-Davidson has been struggling with sales. U.S. growth is sluggish for the motorcycle maker, and overseas is where it can still find growth.
With the potential for higher costs in the markets it is looking to find growth in, the tariffs would be a major setback.
That’s why it’s a no-brainer to move production closer to avoid paying those tariffs. This will allow the company to compete with other manufacturers on an even level.
I’m not saying the tariffs are fair or right. But in a world where tariffs exist and are going through changes, these types of things are going to happen.
Now that the company has had a public spat with the president, investors will pay attention.
They’ll see how committed Harley-Davidson is to creating value for shareholders, rather than to pleasing the president.
This is a stock that has steadily declined more than 30% since 2014, with few buying opportunities along the way.
Well, if you have been looking for a chance to own shares of Harley-Davidson, now’s the time.
With a 3.3% dividend yield, and trading at just 14 times earnings versus an average of 24 times earnings for stocks in the S&P 500 Index, we are looking at a cheap stock that is making the right moves to position itself for growth.
Chad Shoop, CMT
Editor, Automatic Profits Alert