By Russ and Tiña De Maris
Got a little extra cash burning a hole in your pocket? Feeling a little risky? Maybe it’s time to invest in the RV industry. Two news items from this week could lead you to find a place to perhaps grow your cash. One involves an easy how-to with investing in (gulp!) Camping World. The other may require a little more creativity, but has everything to do with the skyrocketing price of used RVs.
Used RV market blowing off the roof
Used RV price market watcher Black Book has trotted out its findings for June sales. It probably shouldn’t surprise any of us, but the price of used RVs has blasted toward the heavens. Is there a way to use this information to invest in the RV industry?
If Jimmy Durante was alive today, he’d no doubt look at the RV world, wink, and declare, “Everybody wants ta get inta da act!” In May, new RVs rolled off assembly lines and down the road to dealers at an unprecedented rate. Nearly 50,000 units rolled, about 75% more than went off the lines in May 2020. With many manufacturers cheerily telling potential customers that they’re looking at a YEAR before they can buy a new rig, it shouldn’t surprise that used rigs are likewise flying off the lots.
News from the auction houses
Black Book draws most of its data from the wholesale market. Typically auction houses take unwanted RVs from dealers and bank repossessions and remarket them. In June the number of used RVs sold through the auction networks dropped – an unusual situation for this time of year. But you can’t sell what you don’t have, and the number of available used units turning up at the auctions has decidedly nosedived – nearly 14% fewer towables at auction, and almost 18% fewer motorhomes, when compared with sold numbers from May 2021.
But that was the ONLY thing down in the wholesale RV market. Comparing the average selling price from just the previous month (May), motorhome values were up 6.4% to an average price of $68,623, while towables (including travel trailers and fivers) were up 4.3%. That’s not a “bad” gain (if you’re selling) in price for just a 30-day period. But a look at the June 2020 versus June 2021 prices and you’d better hang onto your monocle. Motorhome sale prices jumped a whopping 45% in a year. Towables didn’t lag far behind, up 32% over that same 12-month span.
And we’re not talking about “spring chicken” rigs here either. The average model year of towable rigs at auction was 2015, while motorhomes were clearly “vintage” sellers, with an average model year of 2011.
What’s it mean for you?
So what’s it all mean? If you have the cash and skills to snap up any used RVs you run across, and give them a bit of a spiff, you might find you can turn them in a hurry. It’s another way to potentially invest in the RV industry. It’s a big topic on some social media sites: “Mom buys old trailer, fixes it up, sells it and puts money in the bank.” Of course, you’ve got to be able find these things. They may be as scarce as the proverbial hen’s teeth.
If you’re interested in a less labor-intensive process of growing your money with the RV industry, then listen in to what a couple of stock market gurus have to say.
Invest in the RV industry via Camping World?
Gack! We never thought we’d find our fingers punching such a statement. But we are here to report the news. There are probably plenty of readers who would have – well – philosophical objections to cramming cash into “cramping world.”
But as we said, we’re here to report the news. Here’s what an article on forbes.com had to say about the potential “undervaluation” of Camping World (CWH) stock. First, a Forbes’ writer acknowledges that “the market” doesn’t have much good to say about CWH. But based on their evaluation of Camping World’s “NOPAT,” they provide an argument that even in a worst-case-scenario CWH stock is grossly underrated.
What’s NOPAT? Sounded like some kind of barnyard terminology to us, but essentially it means “net operating profit after-tax.” It’s a measure of how efficient a leveraged company is at operating. Camping World is well-known for how much debt it has, so Forbes used NOPAT to judge just how well Marcus Lemonis is operating Camping World with a view to its future. For those of you who are much smarter about stocks than we are, the Forbes evaluation of CWH’s NOPAT worked out to “11% compounded annually over the past five years.”
Naysayers are “pessimistic”
Earlier this week, Camping World stock was selling at $38 a share. Naysayers, observed Forbes, figured that the company’s NOPAT will head down by 50%. Their response? “This expectation seems overly pessimistic for a firm that has grown NOPAT by 11% compounded annually over the past five years.” Invest in the RV industry through Camping World?
Forbes suggests that even if the company’s NOPAT margin dropped 6% (the same as its three-year average), and it grew its NOPAT by 3% compounded annually between now and 2030, the company’s stock should be valued at $67 right now – a far cry from the $38 it’s trading at.
Too many cow patties?
Too many cow patties for you? Another stock analyzing website, Seeking Alpha, had a similar, “CW stock is way undervalued,” take. We’ll spare you the gory techno-talk and boil down their reasoning.
First, Seeking Alpha points to Camping World’s huge network of repair facilities. Could they be a source of good for the company? Absolutely! Think of how many “newbies” are jumping into RVs and sailing for the horizon. How much do they really know about keeping up with the horrors of RV maintenance? Nada! Aha! Camping World is sitting in the catbird seat, just waiting to bail out those poor, stranded, unknowing (but evidently cash-flush) newbie RVers.
Invest in the RV industry? Seeking Alpha suggests yes. In addition to CWH’s repair-enrichment position, they also point to how the company stands ready to sell brand-new RVs to newbies. And if you’ve been an RVer for more than 10 minutes, and you bought a new RV, you know how quickly you’ll need to take it in for service.
If Camping World is good, how about other RV industry players?
Seeking Alpha, too, thinks CWH stock is undervalued. They don’t put the price tag at that same $67 value as Forbes does, but close. Invest in the RV industry: Camping World stock, in their book, ought to be priced at $60 a share.
What about sinking some money in other RV firms, say, Thor, the “god of RV manufacturing”? Nah! Seeking Alpha figures that most other RV industry stock prices are already in their proper orbits.
Invest in the RV industry? Here’s our disclaimer: We’re not suggesting it. We’re simply reporting on the news. There’s a whole lot that can go haywire in a very short period of time. With reports of thousands of RVs sitting in parking lots out in Indiana, waiting for supply chain issues to be resolved, and the completely unknowable value of that nasty virus called COVID-19 (in all its incarnations), personally, we’ll keep our money closer to home. But maybe you’ve got the inclination and the ability to risk investing in the RV industry.