Shares of recreational vehicle manufacturers are entering a period characterized by seasonal weakness, even as sales are rising. According to Bloomberg Business Review, if the decade-long market pattern holds this year, it could present an opportunity for bullish investors.
Shares of Winnebago Industries Inc. have trailed the Russell 2000 Index by an average of 4.4 percentage points in May and June during the past 10 years, while Thor Industries Inc. has trailed the benchmark index by 3.2 percentage points during these two months. This coincides with peak demand: May was the busiest month for wholesale shipments in each of the past four years, according to data from the Recreation Vehicle Industry Association (RVIA) in Reston, Va.
Investors with a longer-term outlook may see lagging share prices as an attractive entry-point to bet on broader industry trends that remain positive, said Boniface “Buzz” Zaino, a fund manager at Royce & Associates in New York, which oversees about $30 billion. “There are a lot of reasons to believe the motorhome market will continue to improve.”
As the largest publicly traded RV makers, Winnebago and Thor offer investors a way to bet on this industry, said Michael Swartz, an analyst at SunTrust Robinson Humphrey Inc. in Atlanta. Seasonal stock weakness in May and June illustrates how some traders build up expectations early in the year, then sell on the news, he said. “If things aren’t absolutely perfect, or as expected, the stocks will trade off.”
Shares of the two industry leaders are diverging. Winnebago trails the Russell 2000 Index by 5.3 percentage points year-to-date, while Thor leads the small-cap group by 5.6 percentage points. Still, both manufacturers have a uniform outlook: Demand is strong ahead of the peak selling season.
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