Recreational Vehicles: Invest In The Lighter Side Of Life

by: Justin Kuepper

It's no secret that snow mobiles, boats and RVs are fun to use, but it turns out the companies that make them can be fun to own, too. The recreational vehicle sector has managed to consistently outperform the S&P 500 by 24% over the past three months and 50% since 2008, according to data on an index compiled by TickerSpy.

Some companies in this index include:

  1. Artic Cat Inc. (NASDAQ:ACAT)
  2. Brunswick Corporation (NYSE:BC)
  3. Harley Davidson Inc. (NYSE:HOG)
  4. Marine Product Corp (NYSE:MPX)
  5. Polaris Industries Inc. (NYSE:PII)
  6. Thor Industries Inc. (NYSE:THO)
  7. Winnebago Industries Inc. (NYSE:WGO)

Snowmobiles Make for a Great Winter Investment

One of the best performing sub-sectors in the recreational vehicle industry has been snowmobile manufacturers, like Arctic Cat and Polaris. Both of these companies have seen their stock prices nearly double over the past year amid solid earnings reports and shareholder-friendly policies like dividends and share buybacks.

Arctic Cat Inc.

Arctic Cat has been one of the strongest performers in the industry. Last quarter, the company reported sales that increased 17%, driven by the launch of its new 2012 snowmobile line-up and an outperformance in its ATV division (although this is expected to decline long-term).

After analysts revised its earnings estimates higher, the company announced a significant share buyback program encompassing some of Suzuki Motors' 6.1 million shares of Class B stock. Meanwhile, insiders continue to hold a significant portion of the stock at around 33% in total.

Polaris Industries Inc.

Polaris Industries is another top performer, jumping more than 70% over the past 52 weeks. Last quarter, the company reported a 26% jump in its revenues, as it saw strong retail demand for its products both in North America and internationally.

Recently, the firm caught the attention of investors when it increased its quarterly dividend by 64% to $0.37 per share, effective for the first quarter of 2012. And with its product mix and pricing continuing to outperform, this dividend could rise even higher moving forward.

The Best Way to Add Some Fun to Your Portfolio

Investors looking to build some exposure to the recreational vehicle sector have a few different options. Value investors may want to look at Arctic Cat for its low price-earnings to growth ((NYSE:PEG)) ratio and attractive valuation, while income investors may want to look at Polaris Industries for its steadily growing dividend that has been catching some attention.

Of course, these stocks both trade near their 52-week highs, which makes them a riskier play for shorter term investors. As a result, options traders may want to consider conservative strategies, such as writing covered calls against a long position in either of these stocks to lower their cost basis over time.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.