If the Great Recession gave auto stocks a cold, recreational vehicle (RV) companies caught pneumonia. After all, money and job worries take precedence over high-priced, discretionary products like motorcycles, all-terrain vehicles and travel trailers.
Between 2007 and 2009, RV and power sports sales product sales fell by more than 40% and the industry laid off more than half its workforce. But as the economy began to recover, earnings of RV and power sports companies started to heat up. And while no one is ready to herald a revival of the 2006-era glorious summer just yet, the best companies in this sector have weathered the storm and are coming back strong.
The companies in this sector best positioned to thrive as consumers take to the roads (or seek adventure off road) are those that survived massive consolidation by controlling costs, managing inventories and investing in strong brands. Here are three hot stocks in the sector that are worth checking out:
Harley-Davidson (NYSE: HOG). At about $42, Harley-Davidson has nearly doubled from its 52-week low of $21.26 last July. With a market cap of $9.94 billion, it pays a dividend yield of 1.3%. The stock has a price-to-earnings growth (PEG) ratio of 1.66, which indicates it’s valued about right. HOG is carrying a lot of debt: $5.69 billion compared to cash of $778.2 million –a total debt/equity of 243.03. This Milwaukee-based motorcycle company boasts one of the most enduring American brands and a fiercely loyal brand community. The financial crisis in 2008 cut its earnings by nearly two-thirds, forcing a massive company restructuring in 2010. Since dropping to around $8 in March 2009, HOG shares battled back to break the $40 threshold this year.
Thor Industries (NYSE: THO). At $28.95, THO is trading more than 28% over its 52-week low of $22.50 last August. With a market cap of $1.62 billion, it pays a dividend of 1.40%. The stock has an attractive 0.88 PEG ratio, an indicator that it is undervalued. Thor has $59.25 million in cash and no debt. From 2008 to 2009, the RV and travel trailer company’s sales fell by more than 40%; earnings dropped 52%. But the company slimmed down its operations and fought back from the worst year in its history. Since sinking to $9.27 in March 2009, its stock price has more than tripled.
Polaris Industries (NYSE: PII). At $114.18, Polaris is trading more than 120% over its 52-week low of $51.81 last August. With a market cap of $3.92 billion, it pays a 1.60-% dividend. The stock has PEG ratio of 1.36 and modest debt: $346.3 million cash and $200 million debt – a total debt/equity of 51.40. Between 2008 and 2009, the ATV and snowmobile manufacturer’s sales fell by 20% and earnings were down 14%. The company’s lean manufacturing processes, which focused on the use of common platforms and lower inventory, cut costs by one-quarter and boosted productivity by 8%. Since dropping under $14 a share in March 2009, Polaris stock has been on a tear – increasing more than eight-fold.
As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.
