Editor’s Note: The following investment advice story is from John Udovich writing for the SmallCapNetwork. Among the products of Cavco Industries Inc. and Skyline Corp. are park models purchased by campgrounds and RV parks.
While much of the homebuilding sector has been left for dead, the RV and manufactured home sector is showing some signs of life, meaning it might be time to take a look at RV and manufactured home stocks like Cavco Industries (NASDAQ: CVCO), Skyline Corp. (NYSE: SKY) and Drew Industries (NYSE: DW). After all, there are still consumers who can afford RVs while manufactured homes have moved beyond images trailer parks. So which are the best RV and manufactured home stocks, Cavco Industries (CVCO), Skyline Corp. (SKY) or Drew Industries (DW)? Here is a closer look to help you decide:
Cavco Industries Made a Big Acquisition Last Year
Cavco Industries is a builder of manufactured and modular homes, park model homes and vacation cabins in the USA. At the end of May, Cavco Industries reported that fiscal 4Q2012 net sales surged 156 percent from $38,822,000 to $99,513,000 while net income rose from $1,733,000 to $2,888,000. For the entire fiscal year, net sales rose 158 percent to from $171,827,000 to $443,066,000 while net income rose from $4,072,000 to $29,728,000. It should be noted that the surge in revenues and net income was due to Fleetwood Homes, Inc., a subsidiary that is owned 50 percent by Cavco and 50 percent by the Third Avenue Value Fund (TAVFX), acquiring Palm Harbor Homes Inc. during the quarter ended June 30, 2011. The acquisition expanded the geographic reach of Cavco Industries along with the diversity of home products plus allowed for the introduction of related mortgage and insurance business lines. Otherwise, Cavco Industries did note seasonally slow winter home buying activity that began to show a modest improvement in both consumer interest and traffic levels at the end of the quarter, plus a generally challenging economic environment. On Thursday, Cavco Industries rose 3.63 percent to $47.94 (CVCO has a 52 week trading range of $28.43 to $54.11 a share) for a market cap of $330.34 million plus the stock is up 19.7 percent since the start of the year, up 27.12 percent over the past year and up 34.1 percent over the past five years.
Skyline Corp. Has Not Seen Profits in Awhile
Skyline Corp. designs, produces and markets manufactured housing, modular housing and towable recreational vehicles to independent dealers and manufactured housing communities located throughout the U.S.A. and Canada. Investors should be aware that Skyline Corp. has been operating at a loss since 2008 while EBITDA and free cash flow has been negative since 2007. Moreover and last March, Third Avenue Management sold 55.7 percent of its stake in Skyline Corp. for $3,394,689 while keeping a 4.31 percent stake. Third Avenue has had the stock since before the 2Q2009 after it had been sinking for several years and had bought it for roughly $20 per share – well above its current market price. On Thursday, Skyline Corp. rose 3.05 percent to $4.39 (SKY has a 52-week trading range of $4.02 to $17.95 a share) for a market cap of $36.84 million plus the stock is up 0.92 percent since the start of the year, down 70.7 percent over the past year and down 86.6 percent over the past five years. Skyline Corp. does have a forward dividend of $0.36 for a dividend yield of 8.5 percent.
Drew Industries is Benefiting From More RV Sales
Drew Industries supplies a broad array of components for recreational vehicles (RVs) and manufactured homes to nearly all of the leading producers of RVs and manufactured homes. In Early May, Drew Industries reported better than expected quarterly sales results thanks to strong RV demand (sales in the RV segment accounts for more than three-quarters of the company’s net sales). Specifically, Drew Industries reported that net sales rose 32 percent to $223.6 million while net income came in at $11.1 million verses $9.4 million. Moreover, sales in the RV Segment to producers of travel trailer and fifth-wheel RVs rose 29 percent verses an 11 percent industry-wide increase and the company noted that over the past few months, retail demand in the RV industry has been improving – despite the economic headwinds. It also worth noting that Drew Industries’ manufactured homes segment saw sales rise 26 percent thanks to a 35 percent increase in industry-wide production of manufactured homes during the quarter (DW has less content in smaller homes which accounted for some of the industry rise). On Thursday, Drew Industries rose 0.70 percent to $27.20 (DW has a 52-week trading range of $17.49 to $30.55 a share) for a market cap of $605.86 million plus the stock is up 10.9 percent since the start of the year, up 14.3 percent over the past year and down 18.6 percent over the past five years.
The Bottom Line. Investors should probably stay away from Skyline Corp. (SKY) and instead be taking a closer look at RV and manufactured home stocks like Cavco Industries (CVCO) and Drew Industries (DW) as they appear poised to move higher.