Happy Independence Day!
Which undervalued stock should you buy today, in honor of the 4th of July? What investment opportunity does the holiday bring to mind? An energy stock, for those who are traveling? A beer stock, for those who are staying home? No, but keep reading and you’ll find out about my best undervalued stock to buy today a bit further along.
I’m a history buff, so naturally I think everyone should know why we celebrate the fourth of July. Independence Day is a federal holiday in the United States commemorating the adoption of the Declaration of Independence 241 years ago on July 4, 1776. The Continental Congress declared that the thirteen American colonies regarded themselves as a new nation, the United States of America, and were no longer part of the British Empire. The Congress had voted to declare independence two days earlier, on July 2.
Independence Day is commonly associated with fireworks, parades, barbecues, picnics, concerts, baseball games, family reunions and travel. Political speeches and ceremonies are also Independence Day activities.
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During the American Revolution, the legal separation of the thirteen Colonies from Great Britain in 1776 actually occurred on July 2. The Second Continental Congress voted to approve a resolution of independence proposed in June by Richard Henry Lee of Virginia. His proposal declared the United States independent from Great Britain rule. After voting for independence, Congress turned its attention to the Declaration of Independence, a statement explaining this decision, which had been prepared by a Committee of Five, with Thomas Jefferson as its principal author. Congress debated and revised the wording of the Declaration, finally approving it two days later, on July 4, 1776.
Many Americans will be taking advantage of the holiday and nice summer weather by going camping. I’m a camping enthusiast and will hit the road whenever possible. My wife and I enjoy getting away to enjoy the great outdoors and all that nature has to offer. We have noticed that our favorite campgrounds have become noticeably more popular during the past year or two. Is there an investment opportunity in this trend? Yes, makers of camping equipment are benefiting from the camping boom.
The popularity of camping should continue well into the future, too. People globally are spending their money on enjoyable experiences rather than material things. You can take advantage of this trend by purchasing one of the stocks that manufactures campers and camping equipment. I can attest that campers spend a lot of money on their camping hobby. My garage is overflowing with camping gear!
Thor Industries (THO: Current Price 104.52) designs, manufactures and sells travel trailers, motor homes and other recreational vehicles and related parts and accessories. Thor sells primarily to customers in the U.S. and Canada. The company offers travel trailers under the Airstream, Classic, Sport, Flying Cloud, Land Yacht and Eddie Bauer trade names, and it sells motorhomes under the Four Winds, Hurricane, Chateau, Challenger, Tuscany, Axis, Greyhawk and Redhawk trade names. Many Thor vehicles will be on the road this July 4th!
Thor also makes and sells fifth wheels under the Redwood, DRV Mobile Suites and several other trade names, equestrian recreational vehicle products with living quarters, and lightweight travel trailers.
The company markets its recreational vehicles through independent dealers. Thor Industries, founded in 1980, is based in Elkhart, Indiana.
Demand for towable and motorized recreational vehicles has increased at an accelerated pace during the past five years. Retirees and families are spending more time and money on the recreation and leisure aspects of their lives. The trend is expected to continue during the next three to five years and beyond. Thor has acquired nine companies during the past 25 years. Its latest acquisition, Jayco, has added significant sales and earnings during the past nine months.
Thor’s backlog of orders has increased exponentially, with orders for towable trailers up 87% from a year ago, and orders for motorized vehicles up 96%. Analysts have been increasing sales and earnings forecasts, but with orders almost doubling, Thor will easily beat estimates during the next 12 months. To meet the increasing demand, Thor is building two new manufacturing facilities which will add 900,000 square feet of production space.
I expect sales and EPS to surge more than 20% during the next 12 months, after increasing 27% and 29% respectively during the latest 12 months. At 17.2 times current EPS and with a dividend yield of 1.2%, THO shares are undervalued. The stock price will likely rise 28% to my Minimum Sell Price of 135.94 within one year. Buy at 110.05 or below.
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