It’s supposed to be very lame to think that an RV motor home is cool, I know. It’s like, who wants to spend 400 miles behind the wheel in something five times the size of a Good Humor truck, with your wife sitting next to you in a house dress and curlers, smoking a Marlboro and sucking on a Dr. Pepper, and turning to you every half-mile and asking, “Are we there yet?”
Well, that's the downside. The upside is, when you can’t stand it anymore, you can always just tell her to shut up and get in the back.
For whatever reason, motor homes are hot, and few companies are benefiting from the boom more than Winnebago Industries Inc. of Forest City, Iowa. We’ll get into the particulars of the matter in a minute, but first some background on the industry as a whole.
Time was when “motor home” was just a fancied-up word for “trailer,” which in turn would bring to mind the place where you park one so that tornadoes would know where to go to ruin the greatest number of them in the shortest period of time. Trailer parks are also where you’d find people willing to swear on the family Gideon that they’d just had a conversation with a visitor from Venus ... where guys would go to hide when they’d just broken out of Joliet or San Quentin ... and where Bill Clinton seemed to have a knack for turning up his favorite kind of lady friend (as in Gennifer Flowers).
We’re not talking about that world here. We’re talking instead about the motor home world from the right side of town ... the world of RVs that people with jobs and bank accounts and actual educations are now buying and driving.
You’re seeing them everywhere this summer — on I-95, in the Adirondacks, along the Pacific Coast Highway, in Minnesota. They’ve become the thing you trade up to when not even a GMC Suburban is big enough to get you away from the kids. You don’t just want to put them in the back — you want them all the way back there in another time zone, like you had them stored in a steerage class compartment on a cruise ship and you were up on the bridge with Kathie Lee.
In fact, motor homes are for those of us who don’t even want the kids along at all anymore, for the folks who send their kids off to college and then instantly sell the house and move into the motor home before the precious darlings have boomeranged right back to the front door, saying, “Can I put my boom box and stuff back in my room ... just for a few days?”
Motor homes are for folks ready to hit the open road with a bumper sticker reading, “We’re Spending Their Inheritance, OK?” and similar sentiments of a generation that is looking at — well, how should one put it? — the end of the road.
There are three classes of motor homes: A, B and C. Class A homes are basically houses built on truck chassis. These are the big mothers that look kind of scary when you see some 70-year-old guy wheeling it down the Interstate in a crosswind. Class B homes are the ones that look like panel trucks with the top raised via an extension thing so you can stand up inside. Class C homes are downsized versions of Class A homes, built on van chassis instead of truck chassis.
There’s a whole subculture to these things, with the owners of Class A vehicles at the top of the heap — as in, it’s cooler to pull up in a Mercedes SL roadster than a Ford Mustang. They’re both cars, but, well, you get the idea. At the other end of the Big Dog spectrum are the Class B homes, which are like living inside a Peapod delivery truck; you can do it, but for more money you could walk around as well as just stand up.
Whatever you choose, there are zillions of Web sites to tell you whether to lease or buy one, how to finance it, what insurance to get and where you can go once you’ve got one. Here’s a one-stop-shopping site with links to most of them: http://www.rvamerica.com/.
Stock in high gear
On the other hand, if all you want to do is make some money from all this, then forget about buying an RV and simply buy some stock in Winnebago Industries. Winnebago is the undisputed leader in the RV field, with the best-known brand name in the business, the dominant market position, strong finances and a stock price that is trading within pennies of its all-time high.
Rising energy costs have hit the entire motor vehicle sector this year, and RVs are no exception. But Winnebago has held up better than one would have expected. Third-quarter revenues, announced by the company June 20, were down less than 8 percent from year-earlier levels, even though a recent report by CIBC World Markets estimates that overall industry sales in the quarter fell by 20 percent.
In the process, Winnebago continues to grab market share from its rivals, with CIBC now estimating that the company holds 18.2 percent of the Class A and C markets (it produces no “B” vehicles), up from 17.1 percent a year ago.
Winnebago manages its business efficiently and well, with the result that costs have been kept tightly under control in the current market downturn, and this in turn has led to the surprising result that operating cash flow for the business has actually been rising for much of this year vs. the year-earlier period.
The company’s balance sheet looks uncommonly strong. Cash is up sharply from earlier levels, working capital is solidly in the black and getting better every quarter, and book value is also strong and improving — with more than $9 per share of stockholder equity on its books.
The company’s stock barely declined at all in the market sell-off that began earlier this year and is now trading fractionally above the long-term high that it touched in the summer of 1999. Technicians look at a chart like that and say that Winnebago, having “tested” its previous high and broken through it, now has nothing but upside ahead.
The market’s fundamentals tend to support such a view. Interest rates are falling, oil prices have stabilized and every month roughly 350,000 new customers are being added to the company’s core market of 50-plus aging baby boomers. Given all that, the investment potential in this stock seems tilted strongly to the upside. And of course, if you’d rather not take the chance, then just go buy one of their RVs and entertain yourself that way instead.