Travel in Style With RV Stocks

 | Jun 13, 2014 | 11:00 AM EDT  | Comments
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Stock quotes in this article:

dw

,

tho

Summer is here and the urge to hit the road has descended upon many Americans. Though not one who likes to get into an RV to discover this country, I am appreciative of the companies that cater to wheel-crazy travelers.

Those who follow my column know I choose stocks based on recommendations of my guru strategies, which are computerized strategies I created that mirror how history's greatest investors choose stocks to buy. From these, I can also indentify industries with strong investment potential. Right now, high on my gurus' list of industries are RVs and mobile homes.

In fact, RV News just reported that, according to the Recreational Vehicle Industry Association, shipments of RVs to retailers were up 5.4% in April 2014 compared to the same month the previous year. It was the best April since 2007 and the best first four months of the year since 2007.

To recommend a stock, it is not enough that the company's industry be highly rated; it must earn a high grade from at least one of my strategies. Two companies in the RV and mobile home industry earn such a grade.

Drew Industries (DW) sells components, including windows, doors, chassis, bath and shower units, axles and upholstered furniture, to the makers of recreational vehicles and manufactured homes. The growth strategy that I base on the writings of James P. O'Shaughnessy strongly recommends Drew. It looks at market cap (Drew's is $1.2 billion), earnings per share (which it wants to have increased in each of the past five years -- true for Drew), and price-to-sale ratio, which needs to be below 1.5 (Drew's is 1.12). Companies that pass these tests are rated by their relative strength (a measure of how well a stock has performed in the past year relative to the market). Only the top 50 companies based on their relative strength earn the highest level of recommendation, and Drew's relative strength of 70 places it in this top-50 cohort.

Another RV-related company, whose tires you might want to kick, is Thor Industries (THO). The company reports it is the world's largest manufacturer of RVs, with such brands as Airstream, Bison Coach, Dutchmen and Thor, among others. The company is favored by my Peter Lynch-based strategy, which focuses on the P/E/G ratio (price-to-earnings relative to growth). A measure of how much the investor is paying for growth, a P/E/G of up to 1.0 is acceptable. Thor's P/E/G is a low 0.57, indicating the company is a good buy at this time. Another big plus: zero debt.

If wanderlust is hitting you hard this summer, take to the road with these companies' products and stocks. If you are feeling more homebound, you can still travel vicariously with a stock purchase.

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