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Everything’s Coming Up Daisies

Research and Markets, claiming to be the world’s largest market research store, has just released their report on the Recreational Vehicle market in North America. Their analysts forecast a pretty substantial rate of growth between 2018 and 2022 for the RV industry, a compound annual growth rate of just over 8 percent.

I did not have a chance to read the report because they want to charge me $2,500 for a single user electronic version. I did, however, get their overall message of continued growth.

The report covers the following companies:

  • Camping World Holdings
  • Forest River
  • Gulf Stream Coach
  • Northwood Manufacturing
  • REV Group
  • Thor Industries
  • Winnebago Industries

Several of them are private. Of the ones that are publicly traded, this is what their stock prices have been doing over the past five years.

Camping World is a leading outdoor and retailer and includes brands like Good Sam.

REV Group is recently listed and not without some controversy. REV Group builds American Coach, Monaco, Holiday Rambler and Fleetwood.

In June of this year, Johnson Fistel launched an investigation into potential violations of federal securities laws by REV Group to determine if the firm issued misleading business information to investors.

I’ve written about Thor before as they are a powerhouse company in the RV world. They cover a lot of brands including Airstream, Bison, CrossRoads, Cruiser, DRV, Dutchmen, Entegra, Heartland RV, Highland Ridge, Jayco, Keystone RV, K-Z, Redwood RV, Starcraft RV, Thor Motor Coach and Venture RV.

And the last publicly traded company highlighted in the report is Winnebago. I’ve written about them here when they recently acquired a boat company.

How do these companies stock prices line up against the S&P? For the most part, pretty closely:

Perhaps the RV industry will continue to grow at 8 percent CAGR from 2018-2022. As an investor, I hope that S&P 500 also continues its bull run for the next 5 years, particularly at the start of our retirement.

However, it has been a very long bull run. Including dividends, the S&P 500 has returned about 25% annually since March of 2009. Whenever this bull ends and the markets go down, sales of RVs may not continue to come up like daisies.

Trade Wars Are So Much Fun

I caught this on CNBC:

Thor Industries’ warning about rising tariff-related costs in its third-quarter earnings report sent shares plunging to 2018 lows, but CEO Bob Martin told CNBC on Thursday that the company is finding ways to blunt the impact.

“We thought it’d be minimal,” the CEO admitted in a “Mad Money” interview with Jim Cramer. “Today, they’re still kind of all over the board and we’re just finding ways to kind of counteract them whenever we can.”

For Thor, the United States’ largest recreational vehicle manufacturer, that means cutting raw costs and “de-contenting,” or taking certain ancillary products and features out of its higher end RVs.

Thor’s stock has been under pressure since the Trump administration enacted steel and aluminum tariffs in May, which hike Thor’s costs by stymieing cheap imports.

That is an interesting word, isn’t it?

De-contenting.

De-contenting means that you pay the same price, or sometimes more, for less.

This might not be the best time to purchase a new higher end RV from Thor.

Of course, trade wars hurt on both sides.

The Canadian dollar has slid below 76 cents which will make our first winter south in retirement considerably more expensive.

Hopefully the politicians and the bureaucrats in Canada and the U.S. come to a reasonable compromise.

Chronic RV Problems

I do worry about it. The overall reliability of our coach. I follow a number of forums online and every day I am reading about issues that people experience with their Newmar Class A motorcoaches. Silently, I hope that we don’t run into many of those issues. Issues that sideline travel plans, or, far worse, engulf a coach in flames.

This came through one of my news feeds about a Thor Tuscany coach:

So much for the lure of the road.

Bill and Jennie Mangan say their dream of spending the first 10 years of joint retirement traveling the country inside their luxury RV quickly faded beneath a cloud of diesel fumes pouring into their bedroom at night as leaking hydraulic fluid seeped into a basement drawer.

Then there was the sewage, which they say pooled daily in their bedroom and geysered from their shower drain like an off-color Old Faithful each time they flushed the toilet. The combination, the couple says, left their new Thor Tuscany 44MT smelling like a $270,000, rolling outhouse.

They have sued Thor Industries for a full refund on the coach plus $100,000 in damages for 160 separate defects.

They spent almost all of their time with the coach dealing with defects.

I hope our coach will fare better.

Entegra Enters Class A Gas and Class C

I came across this press release from Entegra:

Entegra Coach recently announced the expansion of its family of luxury products to include luxury Class C and luxury gas Class A members.

“The name Entegra Coach is synonymous with luxury motorhomes,” said Andy Baer, GM of Entegra Coach. “Expanding into smaller coaches allows us to better support our loyal Entegra Owners by providing luxury options prior to, and after, their large diesel coach lifestyle. … In addition, now multiple generations of families can enjoy the Entegra Coach lifestyle together, while in the luxury of their own coach.”

We almost bought an Entegra.

This one actually:

It was the first coach that we walked through when we went to the Hershey Show way back in September of 2015. Loved it. And the salesperson was very keen to cut us a great deal. If we bought the coach right then.

“Canadians buy from us all the time!” He told us.

We were not there to buy from a U.S. dealer though. We were there to do our research. And we ultimately decided on a Newmar Dutch Star.

We bought our coach from a Canadian dealer. Primarily for warranty support and relative ease of access. And our Canadian dealer, the Hitch House, has been terrific.

Entegra became part of Thor. Thor was founded in 1980 when two entrepreneurs acquired Airstream. Then Thor made a string of acquisitions leading up to Jayco.

Thor had a knockout quarter with record sales of $2.23 billion, up over 30% and record net income of $128.4 million, up over 63%.

I had posted about Thor in December of 2016. At that time, the share price was $105 USD.

The current quote for Thor is $153 USD. Really big jump on their results. Yikes.

Companies like Thor don’t fit into my investment portfolio although given the incredible surge in the RV industry, perhaps I should have taken a bit of a position in Thor. It looks like easy money now doesn’t it?

Hard to say how long the ride might last for Thor.

This move by Entegra to get into Class C and Class A gas coaches is interesting. The new products were to be featured today at the RVIA show in Louisville. One luxury diesel Class C coach, the Entegra Qwest, two luxury gas Class C coaches, the Entegra Odyssey and Esteem, and one luxury gas Class A coach, the Entegra Emblem.

Nothing up on the Entegra website as yet.

I’ll have to check back and see what they are doing on this front.

With all of this demand and new product, it is bound to start getting crowded at the RV parks.

Andy Pargh has a couple of interesting posts about Entegra that he wrote back in June of 2016 here and here.

For whatever it might be worth, Andy went on to purchase a Prevost.

 

Thor Industries

We almost bought an Entegra Coach. This one actually:

It was the first one that we saw at the 2015 RV Show in Hershey, Pennsylvania. Loved it. For a number of reasons, though, we went with the Castaway, a Newmar Dutch Star. We do not regret our decision.

So, what does the Entegra coach have to do with Thor Industries?

Thor holds an extensive set of RV subsidiaries including Airstream, Dutchmen, Heartland, Keystone, and Thor.

Earlier this year, Thor acquired Jayco and its subsidiaries which included Jayco, Starcraft, Highland Ridge and, yes, Entegra.

So, how did the stock market react to the acquisition? The chart below tells that story:

I am an active investor but I do not trade in the RV industry. A bit too volatile for my tastes. Obviously the stock market really liked the Thor acquisition deal. Very impressive stock performance.

Entegra owners? Well, let’s just say that they seem a little concerned about some of the changes taking place as a result of the acquisition.

Thor seems to be doing very well so far as they announced at the end of November record results for their fiscal 2017 first quarter. Sales up by 66%, net income up by 56%, diluted EPS up 55% and their backlogs more than doubled over their fiscal 2016 first quarter.

Thor believes that 2017 will be one of the strongest years for wholesale shipments for the industry since the 1970s.