In this six-part series, we will go through each one of the larger positions DE Shaw traded this past quarter
DE Shaw is a New York–based $30 billion-plus quantitative hedge fund founded in 1988 by David E. Shaw, a former Columbia faculty member. The firm’s primary trading method is systematic and computer-driven. DE Shaw has over 1,000 employees in North America, Europe, and Asia, with an international reputation for successful investing based on innovation and strong risk management.
Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).
Why sell Harley Davidson (HOG)?
Harley Davidson is a strong company with a globally recognized brand, but its last quarter earnings missed Wall Street consensus estimates. Retail sales posted strong gains of 20% and international sales grew 7%, but estimates were slightly higher. Gross margins actually improved, growing to 35.3%, which was a 0.5% improvement year-over-year. Although HOG may be a sound long-term investment, its significant share price outperformance over the past year, during which the stock returned 42%, may have warranted the company’s sale. DE Shaw may have decided to take profits due to a relative high valuation.
What does Harley Davidson do?
Harley-Davidson, Inc., incorporated in 1981, operates in two segments, the Motorcycles & Related Products segment and the Financial Services segment. The segments are managed separately based on the fundamental differences in their operations.
The Motorcycles segment designs, manufactures, and sells wholesale heavyweight Harley-Davidson motorcycles as well as a line of motorcycle parts, accessories, general merchandise, and related services. The company’s products sell to retail customers through a network of independent dealers. The company conducts business on a global basis, with sales in North America, Europe, the Middle East, Asia-Pacific, and Latin America.
The financial services segment consists of Harley-Davidson Financial Services (HDFS). HDFS provides wholesale and retail financing and provides insurance and insurance-related programs primarily to Harley-Davidson dealers and their retail customers. HDFS conducts business principally in the United States and Canada.
More on DE Shaw
Paul Singer created Elliott Associates in January 1977, starting with $1.3 million from friends and family. In its earliest years, the firm focused on convertible arbitrage. However, since the 1987 stock market crash and early 1990s recession, the firm has focused primarily on distressed debt investing, and it’s therefore commonly referred to as a “distressed debt” or “vulture fund.” More recently, the company has focused on activism. The firm’s strategies include: