Is Harley-Davidson Inc. (HOG) the Deep Value Stock to Buy Now?
March 15, 2025
We recently published a list of 10 Deep Value Stocks to Buy Now. In this article, we are going to take a look at where Harley-Davidson Inc. (NYSE:HOG) stands against other deep value stocks to buy now.
Deep value investing is a more extreme form of value investing, focusing on stocks that are not just undervalued but significantly mispriced relative to their intrinsic worth. As a contrarian strategy, it seeks companies trading at substantial discounts, often due to temporary setbacks or market inefficiencies. Considered a subset of value investing, deep value investing was pioneered by Benjamin Graham and later refined by Warren Buffett. It targets stocks with extremely low valuations, such as low price-to-earnings (P/E) multiples, low price-to-book (P/B) ratios, and sometimes distressed financial conditions. Given the current macroeconomic landscape—characterized by rising interest rates, inflationary pressures, and increased market volatility—deep value investing has gained renewed relevance as investors search for overlooked opportunities in an increasingly expensive market.
Warren Buffett’s famous mantra, “Be fearful when others are greedy, and greedy when others are fearful,” perfectly encapsulates the essence of deep value investing. This strategy thrives on market inefficiencies, focusing on companies that may be experiencing temporary setbacks due to economic cycles, regulatory challenges, or investor sentiment but have strong potential for long-term recovery. Investors seek businesses with solid fundamentals, strategic shifts, or macroeconomic tailwinds that could serve as catalysts for revaluation.
In a mid-2024 article, GMO LLC’s Asset Allocation Team reaffirmed their conviction in deep value investing, highlighting it as their top long-only investment idea. Rather than relying on traditional labels of “growth” or “value,” they define deep value stocks as those trading significantly below their fundamental worth. While low valuation multiples such as P/E ratios can be indicative of undervaluation, GMO emphasizes that not all low P/E stocks are true bargains—some may be structurally weak—while certain high P/E stocks may still justify their premiums.
GMO’s deep value strategy focuses on the cheapest 20% of stocks relative to intrinsic value, carefully filtering out cyclical traps and low-quality businesses. Their research suggests that in an environment where investor optimism has propelled many stocks to record highs, numerous overlooked deep value opportunities remain. Despite requiring patience, these undervalued stocks present strong potential for absolute and relative returns.
Portfolio managers at the Heartland Mid Cap Value Fund recently cautioned against investing in speculative stocks with inflated valuations, arguing that current market trends of extreme valuation growth and diminished risk aversion are unsustainable. Despite short-term underperformance, they remained confident that disciplined value investing would deliver superior long-term returns.
In today’s relatively expensive market, deep value stocks stand out as attractive opportunities amid widespread over-valuation. Many fundamentally strong businesses have been unfairly punished due to temporary headwinds, making them attractive investments for long-term value seekers. However, deep value investing is not without its challenges—investors must exercise patience and conduct thorough due diligence to distinguish between genuine value opportunities and structurally declining companies.
For those willing to navigate short-term volatility in pursuit of long-term gains, deep value investing offers a promising path.
To identify the 10 deep value stocks to buy now, we started by screening U.S.-listed companies with a market capitalization over $2 billion. We then applied three key deep-value criteria: a forward price-to-earnings (P/E) ratio of 10 or lower; return on equity of at least 10%; and a dividend yield of at least 1%. Of the shortlisted stocks, we then ranked the top 10 stocks based on their forward P/E ratio, placing those with the lowest P/E at the top. Additionally, we also included data on hedge fund holdings in these companies as of Q4 2024 to provide further insight into investor interest.
Note: All pricing data is as of market close on March 10.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A row of motorcycles parked outside a motorcycle dealership, advocating the brands’ presence in the market.
Fwd. P/E: 8.7
Dividend Yield: 2.8%
Number of Hedge Fund Holders: 23
Harley-Davidson Inc. (NYSE:HOG) is an iconic American motorcycle brand, renowned for its heavyweight bikes built for cruising and long-distance touring. With a rich legacy and a fiercely loyal customer base, the company offers an extensive lineup of motorcycles, parts, accessories, and branded apparel.
However, Harley-Davidson hit a rough patch in Q4 2024, as it reported weaker sales amid ongoing cyclical challenges in the discretionary goods sector. In its February 5 earnings release, the company disclosed that global motorcycle shipments fell 53% year-over-year to 14,010 units, largely due to dealer inventory reductions and tough market conditions. For the full year, total shipments declined 17%. Revenue for the quarter plunged 35% to $688 million, and the company posted a net loss of $0.93 per share— a stark reversal from the previous year’s profit of $0.18 per share. The one bright spot was Harley’s financial services division, which managed a 4% revenue increase thanks to higher interest income.
Despite near-term headwinds, Harley-Davidson is executing a strategic transformation under its ‘The Hardwire’ plan, focusing on product innovation, automation, cost efficiency, and productivity enhancements. The company remains committed to driving profitable growth while maintaining dividends and opportunistically repurchasing shares. Designed to fuel long-term success, The Hardwire plan aims to reinforce Harley’s position as the most sought-after motorcycle brand in the world—keeping the spirit of the open road alive for generations to come.
Overall, HOG ranks 10th on our list of deep value stocks to buy now. While we acknowledge the potential of HOG to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.
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