Friday, July 30, 2021
Friday, July 30, 2021

Invest in the RV industry? Two news breakouts from this week

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

blackbook.com

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?

PeRshGo on wikimedia.jpg

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.

##RVT1009b

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Paul
6 days ago

I wouldn’t give Lemonis the change out of my pocket. He’s an *ss and I can’t stand to see his picture. Maybe he shouldn’t ridicule the people who purchase from him to make him rich. He said he doesn’t want my business and I will accommodate.

chuck
12 days ago

Maybe Thor can combine with CW and Lippert and create a bigger junk yard!

Dan
12 days ago

There is a reason why camping world is undervalued! I would never ever invest in that company.

ken bentz. Me
12 days ago

Missed the buy on Camp World when it fell to $4 last year.

Ray
12 days ago

So Forbes and Seeking Alpha both consider CW undervalued, given their current position to profit from the market. It makes one wonder why CW stock is 38 instead of 60 in the first place. Could it be a factor they did not consider?,,,, like customer satisfaction?

Montgomery Bonner
12 days ago

All – I/we, do you remember 2007-08-09? In the early 2000’s National RV was gobbling up manufacturers by the bucket load, financing those purchases with stock/debt. In I think 2008 National RV went Out of business. Some excellent lines of MH’s went bust and now gone, country coach being one. Winnebago is maybe the only company I would consider, and I would have a very tight stop loss order on the stock. Gas/Diesel hits 5-6.00 gallon, RV’s sales are going to plummet. Get ready for it, because it’s coming soon.

Drew
12 days ago

Many knowledgeable professionals disagree with you.

Jeff Craig
12 days ago

Considering RV’ers (caravanners) in the EU, Canada and Australia pay almost that much for a their fuel, and RV’s sell like hotcakes in all three regions, I’d say your logic is flawed.

Charles Yaker
12 days ago

First I think readers should be made aware that Seeking Alpha is a site that offers financial Professionals and Amateurs an opportunity to share their ideas. So it depends on who analyzed Camping World. Having said that I don’t doubt that Camping World is undervalued and in a perfect World would be an excellent investment but it’s not a perfect world and “Camping World might be a money maker but for whom?. Will stock holders benefit or will the benefits be siphoned off by insiders. Bill Black the Savings and Loan lead prosecutor wrote a book called “ the best way to rob a bank is to own one” The book as the title suggests is all about Control Fraud. Now I am not accusing anybody at Camping World of harboring any such thoughts but I don’t think those of us who have soured on them for one reason or another would be wise to invest our money with them.

Drew
12 days ago
Reply to  Charles Yaker

Well said, thanks.

bull
12 days ago

Took a drive from Nashville to Atlanta this week. Drove by at least 10 different RV business’s from Lazyday’s new digs in Murfreesboro TN to other independent RV sellers up and down I-24 and I-75.

They ALL had one thing in common.

A sales lot FULL of new RV’s waiting for new owners!!!

Definitely NO SHORTAGE of new RV’s for sale between Nashville and Atlanta!

After a year of stellar RV sales and now lot’s FULL of new RV’s at least where I live begs the question:

Are they enough buyers to continue the stellar RV sales trends?

I think NOT!

Mike
12 days ago
Reply to  bull

I agree with you! We are full-timers and, even in July, just about every dealer we drive by is chock full of campers. We just completed a 9,000 mile trip from NC to WA and back.

Bill
12 days ago
Reply to  bull

Yes, but there’s no way to tell how many of those are waiting for service, waiting for delivery, or in storage. The dealers know you won’t come in to look if you see an empty lot

Jeff Craig
12 days ago
Reply to  bull

Here in the north Puget Sound, the lots are parking their inventory ‘strategically’ to make the lots look a lot fuller than they were just a few years ago. Probably down about 30% or more on inventory at most dealers. A few of them have moved into new locations, so they actually have more room for inventory (began construction before COVID hit) but they have a lot of trades taking up space up front, and their repairs filling in the back end. Not a scientific, validatable survey, but I’d be curious if you noted something similar.

Crowman
12 days ago

I’d rather go broke than invest in Camping World.

Dan
12 days ago

I just cant help but think that a big part of the growth of RVing is a knee jerk response to the covid issue. I’m guessing the supposed shortage of RVs and camping spots will reverse itself and start looking like a glut of leftovers and used units. And, I would be so wary of anything attached to Marcus Lemonis.

Bob p
12 days ago

After losing $80,000 in make believe money when GM filed bankruptcy 11 years ago I’m back to what I thought of the stock market before investing in my employers profit sharing plan. NADA!

Michael Gardner
12 days ago

It’s all going to come crashing down!

Mark O.
12 days ago

Agree, it’s just a question of when, unfortunately history always repeats itself……mainly due to ignorance OF that past history.

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