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Ever think of buying a motor home or a camp trailer?
For many, owning a recreational vehicle -- a motor home, camp trailers, or truck camper -- seems like an old-fashioned thing to do, a relic of the pre-Internet era.
But sales of these vehicles continue to be quite strong. According to the Recreational Vehicle Industry Association, or RVIA, U.S. RV manufacturers shipped almost 286,000 of the vehicles in 2012, with a retail value of over $10.8 billion.
For RV devotees, nothing else offers the same inviting combination of relaxed comfort and adventure. And for investors, there are some intriguing opportunities to be had in the space.
The market for such vehicles is small, of course. But it's very lucrative -- and growing.
According to the RVIA, U.S. wholesale shipments of RVs of all types totaled just over 321,000 in 2013. Most of those were "towable" RVs. The retail value of the approximately 286,000 RVs shipped in 2012, the last year for which full numbers are available, was about $10.84 billion, according to the RVIA.
How does the recreational vehicle industry work?
Once upon a time, the RV industry had no dominant player. Instead, a long list of small companies marketed their products and made steady profits.
But like many other industries, a wave of consolidation has resulted in a few key players, each of which controls several long-lived brands.
Indiana-based Thor Industries (NYSE: THO) owns the famous Airstream brand, as well as Dutchmen, Crossroads RV, Keystone, the Thor motor home brand, and several others. Thor posted net income of $152.9 million in fiscal year 2013 on revenues of $3.2 billion.
In addition to its famous namesake brand, Winnebago owns the Itasca motor home and Sunny Brook trailer brands, as well as MetroLink, a line of small buses. In fiscal year ended 2013, Winnebago posted net income of $32.0 million on revenues of $803.2 million.
Other players include privately held Allied Specialty Vehicles, which owns several motor home brands (including Fleetwood and Monaco) as well as a long list of fire truck, bus, and commercial vehicle brands; Jayco, which has expanded beyond its pop-up trailers into premium towables and motor homes; and Forest River, a Berkshire Hathaway (NYSE: BRK-B) company that controls the Coachmen and Dynamax RV brands, among others.
What are the investing opportunities in the recreational vehicle industry?
For investors interested in a "pure play" in the RV space, both Thor and Winnebago offer intriguing opportunities. Both are solidly profitable, with well-recognized brand names and a growing presence in the higher-margin premium tiers of the business. Shares of both companies have enjoyed a solid run since the trough of the last recession but have fallen back a bit recently. Thor pays a small dividend; Winnebago does not.
But investors tempted to bet on RVs should keep in mind that, like the auto business, RVs are a cyclical industry with high fixed costs -- but unlike autos, which are a necessity for many, RVs are a genuinely discretionary purchase for most. Share prices of these companies will be very vulnerable to changes in the economic winds.
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