Patience is a very important factor in investment success. This is particularly valid when stocks selected for investment decline when the overall stock market is appreciating, such as the current case with Camping World Holdings (CWH) and Winnebago (WGO). However, because we do our own research at J.L. Bainbridge, we have extensive knowledge of each company carefully selected for investment. This is essential to having the confidence and patience required to stay with an investment when other investors are ambivalent. CWH is an excellent example. This company is the largest RV retailer and plans to increase the number of locations by over thirty percent over the next three years. Most of this expansion is from the addition of RV sales to approximately sixty Gander Outdoor stores which CWH purchased out of bankruptcy on very favorable terms. By attending an analyst meeting at the first of these stores rearranged to include RV sales located in Kenosha, WI, we gained valuable insight into their strategy which includes the following: First, the very large stores carry a wide assortment of outdoor sporting, fishing, hunting, camping and other outdoor activity goods. By rearranging the merchandise using multi-tier shelving, one third of the floor space became available for RV sales, RV maintenance and accessories resulting in over one hundred RVs on display with over thirty inside the store. Secondly as a result of the bankruptcy, renegotiating the lease reduced occupancy costs by more than one-half. Lastly, offering a discount on store purchases to GOOD SAM members has driven membership to over two million, and GOOD SAM is CWH’s most profitable division. Despite these positives, CWH’s stock continues to stagnate due to concern RV sales may slow due to higher interest rates. Hence, their stock may continue to languish until earnings are released early next month.
There is also a concern that RV dealer inventories are too high after dealers over ordered last year due to several years of product shortage. Consequently, there is concern RV manufacturers may see orders fall. Accordingly, WGO’s stock has declined since Thor Industries, by far the largest RV manufacturer, reported lower earnings last month due to RV retailers temporarily curtailing orders to reduce inventory. In our view, WGO is in a much different position than Thor because WGO’s new management is reversing several years of bad management and declining market share. WGO is now gaining market share, adding new dealerships and substantially reducing costs. Therefore, the industry inventory adjustment may have little impact on WGO. We will find out later this month when WGO reports their latest earnings. If in fact WGO is affected more than we expect, this is a short-term three-month problem, which does not alter the demographic drivers of RV demand from baby boomers retiring and millennials entering the RV lifestyle. Accordingly, we remain very positive on both CWH and WGO and have the patience to wait until other investors’ attitudes change.
Our last blog about direct IRA charitable contributions or QRD (Qualified Charitable Deduction) raised some questions. The following illustrates the benefit for clients over 70.5 years that are required to take Required Minimum Distributions (RMD). Assume a client filing jointly has $22,000 of deductions which includes $6,000 of charitable contributions. The new, higher $24,000 standard would be used. But if the $6,000 of contributions were given directly from their IRAs, this amount does count toward their RMDs but is not added to their taxable income. This increases their effective tax deduction to $30,000. If you would like more information on QCD’s please reach out to us directly.
The information being provided today is for educational purposes only and shall not be considered specific individual investment advice or recommendation. The information being provided is believed to be accurate at the time of distribution. However, over time may become materially inaccurate or may not apply to your specific circumstances. Please refer to our ADV for detailed information about our services and disclosures. You may request a copy of our ADV by contacting 941-365-3435. In addition, please refer to https://www.adviserinfo.sec.gov/IAPD for additional information on the firm and the Investment Adviser Representatives.