If you haven’t noticed, the price of oil has taken a tremendous dive in the past weeks. This already has translated to reduced prices at the pump. When these events occur, it’s good to think of the auxiliary industries that stand to benefit. A lot of noise has been made as to how this is going to impact highly leveraged shale oil drilling firms, yet other industries exist that have been suffering from over a decade long spell of steep prices at the gas pump.
One industry is the recreational vehicle industry (RV). RV’s at one point where all the rage amongst traveler’s within the U.S. They offered a unique combination; mobility of the road and the quasi comfort of home. In the last decade, escalating fuel prices put a significant damper on RV sales. The single digit miles per gallon made them unaffordable to most and the Great Recession didn’t help an already poorly positioned industry.
Now, we’re in the midst of an at least temporary break in fuel prices at the gas pump along with a wave of Baby Boomers hitting their retirement years. The trend could be shifting in favor of the RV companies.
One of the standards in the RV industry is Winnebago (WGO). The stock has actually been on a pretty steady decline and a recent earnings call noted a reduction in their backlog and inventory level that rose. These two issues aren’t bright spots, but given what we are experiencing in terms of gas prices, this should help bring buys in to dealerships. If this holds true, then the projections for WGO are likely low and in quarters to come will be revised upward.
In short, weak gas prices should be a catalyst for increasing WGO sales, which will give rise to its currently beaten down stock price. Baby boomers entering retirement will be the 2nd positive force for WGO and related companies.
WGO is a stock where I see it reasonable to ‘buy the weakness’ if you’re a long-term investor and keep an eye on the spot rate of oil.
Disclosure: No Position