by John Rubino
What’s the last big toy you buy when things have been good for a really long time and you already have all the other toys? An RV, of course. A completely idiotic thing to own if you already have a house, but when the good times seem likely to roll on forever, why the hell not?
And what’s the first thing you sell when you lose your job and your stocks are tanking? That very same RV. Which makes new RV sales a useful indicator of our place in the business cycle.
What does it say now? Here you go:
Notice the mini-spike in the late 1990s and the major spike in mid-2000s, both of which were followed by corrections. Now note the mega-spike from 2010 and 2016.
And how are things going so far this year? Well, the space is on fire:
(CNBC) – RV shipments are expected to surge to their highest level ever, according to a forecast from the Recreation Vehicle Industry Association.It would be the industry’s eighth consecutive year of gains.
Thor Industries and Winnebago Industries posted huge growth in their most recent earnings report.
Those shipments are accelerating, and should grow even more next year, the group said. Sales in the first quarter rose 11.7 percent from 2016.
Much of the growth can be attributed to strong sales of trailers, smaller units that can be towed behind an SUV or minivan, which dominate the RV market. The industry also is drawing in new customers.
As the economy has strengthened since the Great Recession, and consumer confidence improved, sales have picked up, said Kevin Broom, director of media relations for RVIA.
Two of the major players in the industry, Thor Industries and Winnebago Industries, both manufacturers of RVs, reported huge growth in their most recent earnings report. Thor saw sales skyrocket 56.9 percent to $2.02 billion fromlast year. Winnebago’s surged 75.1 percent last quarter to $476.4 million.
Gerrick Johnson, an analyst at BMO Capital Markets, attributed much of that growth to acquisitions. Thor bought Jayco, then the No. 3 player in the industry, last June; Winnebago bought Grand Design in October.
Thor stock has experienced strong growth over the past year of almost 40 percent. Winnebago tells an even better story: Its shares are up 56 percent over the past 12 months.
“They’ve done massively well because they’ve made massively creative acquisitions,” said Johnson. “Wall Street didn’t realize how creative those deals were. Each quarter they came through. The RV space is on fire, and the demand metrics are quite positive.”
What we have here is another classic short. During the past couple of recessions, RV stocks plunged as everyone came to their senses and stopped buying $60,000 motel rooms. Based on the above chart that’s a pretty good bet to repeat going forward. Let’s revisit this play in a couple of years.