The retail value of the approximately 286,000 RVs shipped in 2012, the last year for which full numbers are available, was about $10.84 billion, according to the RVIA.
How does the recreational vehicle industry work?
Once upon a time, the RV industry had no dominant player. Instead, a long list of small companies marketed their products and made steady profits.
But like many other industries, a wave of consolidation has resulted in a few key players, each of which controls several long-lived brands.
Indiana-based Thor Industries owns the famous Airstream brand, as well as Dutchmen, Crossroads RV, Keystone, the Thor motor home brand, and several others. Thor posted net income of $152.9 million in fiscal year 2013 on revenues of $3.2 billion.
In addition to its famous namesake brand, Winnebago owns the Itasca motor home and Sunny Brook trailer brands, as well as MetroLink, a line of small buses. In fiscal year ended 2013, Winnebago posted net income of $32.0 million on revenues of $803.2 million.
Other players include privately held Allied Specialty Vehicles, which owns several motor home brands (including Fleetwood and Monaco) as well as a long list of fire truck, bus, and commercial vehicle brands; Jayco, which has expanded beyond its pop-up trailers into premium towables and motor homes; and Forest River, a Berkshire Hathaway company that controls the Coachmen and Dynamax RV brands, among others.
What drives the recreational vehicle industry?
Like the auto industry, the recreational-vehicle industry is cyclical -- sales and profits tend to follow economic cycles closely.
And while RV purchases are more "lifestyle" than necessity for most, RV sales tend to follow auto sales fairly closely. There's a good reason for that: Both are driven to some extent by consumers' willing to spend, and by the availability of financing.
Sources: RVIA, Automotive News .
But despite the outsized prices on the most luxurious models, RV manufacturers' profit margins are fairly slim, similar to those seen among automakers. Winnebago's pre-tax profit margin was 6.6% in the most recent quarter, while rival Thor Industries did somewhat better, but only somewhat, with a 7.9% pre-tax margin.
And RVs remain popular. While sales haven't quite recovered to their pre-recession peak, a lot of people own RVs. The RVIA cites a 2011 study showing that about 8.5% of American households owned an RV, with the fastest growth happening in the 35-54 age demographic.
What are the investing opportunities in the recreational vehicleindustry?
For investors interested in a "pure play" in the RV space, both Thor and Winnebago offer intriguing opportunities. Both are solidly profitable, with well-recognized brand names and a growing presence in the higher-margin premium tiers of the business. Shares of both companies have enjoyed a solid run since the trough of the last recession but have fallen back a bit recently. Thor pays a small dividend; Winnebago does not.
But investors tempted to bet on RVs should keep in mind that, like the auto business, RVs are a cyclical industry with high fixed costs -- but unlike autos, which are a necessity for many, RVs are a genuinely discretionary purchase for most. Share prices of these companies will be very vulnerable to changes in the economic winds.
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The article The Recreational Vehicle Industry: Investing Essentials originally appeared on Fool.com.
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