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Tickers in this Article: NYSE:BRK.A, NYSE:BRK.B, HOG, PII, HMC
Following last year's surprise cash injection of $600 million, half of which was contributed by Warren Buffett's company, Berkshire Hathaway (NYSE:BRK.A, BRK.B), shares of legendary motorcycle maker Harley-Davidson (NYSE:HOG) kicked into overdrive, more than doubling in the year since the deal went down. (The Oracle of Omaha's "Rip van Winkle" approach has served him well. Read on to learn more in Warren Buffett's Best Buys.)

IN PICTURES: World's Greatest Investors At the time, the funding was key to keeping the company's cycle sales going, most of which are funded through Harley's in-house financing arm. But while the vote of confidence from America's "billionaire next door" may have saved the company from the brink last year, almost one later the company continues to face some serious challenges.

Market Stunned By Wider-Than-Expected Loss
Investors were recently reminded of this fact when the company's shares plunged nearly 8% following the release of much worse than expected results for the final quarter of 2009. While analysts had been expecting a loss of 31 cents per share, the company reported a net loss of 94 cents a share. It was the largest loss for the company since 1993.

Tough economic times continue to put a crimp in Harley's ability to sell its pricey rides. World-wide retail sales of its cycles fell 53% during the quarter, led by a 28% slump in U.S. sales - its most lucrative market. Looking ahead into 2010, the company now expects to ship between 201,000 and 212,000 cycles, a level that is down approximately 7.5% from even last year's muted levels, and down a whopping 40% from 2006's peak sales of almost 350,000 units.

The Easy Rider Generation Is Aging
Such a massive drop in sales underscores Harley's main problem; the company's key Baby Boomer customer base is aging to the point where they're trading the experience of roaring down an open road on a "hog" for something more sedate like tooling around the links in an electric golf cart. It's a problem that's also affecting the sales of other big cycle makers like Polaris Industries (NYSE:PII) and Honda (NYSE:HMC), which recently revamped its European operations in reaction to falling sales.

In response Harley has launched a huge and costly restructuring: consolidating production, laying off thousands of its workers and selling key assets like its MV Agusta Italian motorcycle unit. Harley's also tried to accommodate its aging demographic by launching a line of easier to handle three-wheeled bikes. Management's hope is that these moves can restore the company to profitability as it adjusts to a lower sustainable level of sales.

The Bottom Line
Following their dramatic run-up after the Buffett-led cash infusion, Harley shares look vulnerable to further near-term weakness as the market fully digests the earnings implications of the company's sober sales outlook. Fears that a further downside revision to these numbers may emerge in coming quarters are likely to add to the current share weakness. (We look at the Sage of Omaha's methodology for evaluating value stocks. Check out Warren Buffett: How He Does It.)

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