Monday, November 07, 2011
Are Recreational Vehicle Stocks a Recession Play?
Why do people buy RV's? Travelers don't have to pay for airline fares or hotel fees or car rental expenses. Large families can travel together for far less than what it would cost to travel by plane. Yes, the price of gasoline is much higher than it was a couple years ago, the price seems to have stabilized. Also, with interest rates the lowest they have been in years, the cost to purchase a motor home, camper, or trailer is favorable.
There are several companies in the business of manufacturing RVs, several of which pay dividends according to WallStreetNewsNetwork.com. An example is Thor Industries, Inc. (THO), the world's largest manufacturer of recreation vehicles which just announced its preliminary sales report. RV sales were up 11% year over year for the three months ended October 31, 2011. The company's brands include Airstream International, Classic, Flying Cloud, and Bambi travel trailers, along with Interstate and Avenue Class B motorhomes. Thor trades at 11 times forward earnings and pays a decent yield of 2.4%.
Another way to play this market is through the stocks of companies that manufacture components for recreational vehicles, such as Drew Industries Inc. (DW). The company produces such products as towable RV steel chassis, axles, and suspensions, thermoformed bath, kitchen, and other products, patio doors, manual, electric, and hydraulic stabilizer and lifting systems, windows and screens, chassis components, and furniture and mattresses for RVs. The stock has a forward price to earnings ratio of 13. Unfortunately, earnings for the latest quarter tanks by 30% over the same quarter last year, on a revenue increase of 13.6%.
A free list of other companies in the recreational industry can be found at WallStreetNewsNetwork.com, which can be downloaded, updated and sorted.
Disclosure: Author didn't own any of the above at the time the article was written.