Safe Travel & Leisure for More Income
July 02, 2020
Editor’s note: Our offices, including customer service, are closed Friday, July 3, for the Independence Day holiday.
In a recent survey, the US Travel Association (USTA) shows that over 60% of folks in the US alone are eager for travel and leisure. This is up from 54% just one month ago.
But there is a big problem.
Who is going to want to get on a plane unless that absolutely need to? And trains? Not unless it’s vital for life and limb. So, we are stuck with just our cars.
Hotels and resorts have always been petri dishes for all sorts of germs. But nothing like COVID-19. So, getting away and staying somewhere just isn’t going to work for a while.
I’ve been thinking and working on this problem for my Profitable Investing subscribers, and I have found the companies that are providing the solution to that pent-up wanderlust.
Outdoor Pursuits for Profits
Recreational vehicles (RVs), including motorhomes and travel trailers, provide the perfect way to get out, get away and stay somewhere else safely.
RVs are just as clean as you keep your home. No one has to get inside besides you. They make for a perfect travel vehicle with a place to cook, sleep and stay.
And thanks to the lockdowns, state and national parks have a lot less traffic in them than in years past. More modern RVs even have the capability to be off-grid and carry more water and fuel. They’ve also got solar power, and 4G and coming 5G evolutions provide communications and streaming entertainment.
Now, these come in various levels of cost, but none are really cheap. So, with all of the unemployment, who is going to be able to buy these?
Well, millions more are still thankfully employed, and others are retired. And with savings and bank deposits bulging quickly over the past few months, there is cash out there to buy these get-away vehicles.
My first pick is Thor Industries (THO). The company is primarily focused on North America and builds and sells motorhomes, trailers and related accessories and parts. Its brands are well-known to those that research the RV market, including Airstream, Heartland, Jayco, Starcraft and many others.
The company’s sales were trailing off from late 2016 through the first quarter of 2019. But the last four quarters have seen improvements. And this really showed up with a surge of sales for the first quarter, bringing the level back up nearly to recent highs last seen in 2016. I believe the company will see further improvement in the current and pending quarters.
The company has thinner margins like for many vehicle-makers. But it runs a tighter ship as a company, with a return on equity running at 9.5%. It has a good cash surplus compared to liabilities exceeding 40%. And while public, it has a private company level of debt, as management has been conservative. Debt to assets is only at 33.7%.
Thor Industries (THO)—Source: Bloomberg Finance, L.P.
It also pays a dividend yielding 1.5%. And even as the stock is getting noticed as a problem-solution company, it is still valued at a 30% discount to its trailing sales.
THO is a great buy for the new normal, ideally for a tax-free account.
Floating Another Idea
Boats are basically like floating RVs. They are transportation vehicles as well as places to stay. And even for just a day out, boats provide recreation that can be well-distanced from others.
Marine Products Corporation (MPX) is the boat version of Thor. It has a diversified series of branded boats for fresh and saltwater that span cabin cruisers and boats with overnight capabilities to recreational boats and beyond.
Like Thor, revenues have been trending down from late 2018 to date. However, I see boats gaining in demand.
Marine Products Corporation (MPX)—Source: Bloomberg Finance, L.P.
The company has loads of cash. Its cash and equivalents amount to 420% of current liabilities. And as for debt? Pretty much none. Debts to assets are running at 0.1%.
It yields 2.3%, and the stock is getting noticed since March. It’s also a value, as it trades at only 1.7 times trailing sales.
MPX is another great get-away buy, ideally for a tax-free account.
All My Best,
Editor, Income Investor’s Digest & Profitable Investing
Author, Income for Life
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