Why Warren Buffett Would Love Camping World Holdings – The Motley Fool | Gmx Pharm

Playing matchmaker for Warren Buffett is akin to trying to find a gift for someone who has everything. Arguably the greatest investor of our time, Buffett has had no problem finding the right stocks to buy or companies to acquire. Mr. Buffett, may I interest you in a few? Camping World Holdings (CWH 12.48%)?

Before we dive into why the nation’s largest retailer of recreational vehicles (RVs) is a great fit Berkshire Hathaway‘s (BRK.A 0.97%) (BRK.B 0.95%) Portfolio, we can also point out that Buffett’s company is already in the RV market. It bought RV manufacturer Forest River in 2005. It also owns GEICO, the insurer, which has a whole division of specialists dedicated to RV, camper, RV, and trailer owners.

I still think Camping World would look good as a part or all investment in Buffett. Let’s kick those hoops.

Image source: Getty Images.

Again on the street

The RV industry is a highly fragmented market, but Camping World is embracing. It has been able to expand its presence across the country organically and through one-off acquisitions. It closed out 2021 with 187 retail locations in 40 different states.

The growth has been impressive. They say the RV market is cyclical, but Camping World has had at least eight straight years of positive sales growth — and that includes double-digit jumps in all but two of those years. The last two years have been particularly remarkable. Sales rose 11% in 2020, a tough year for most auto dealerships. Traditional car sales plummeted during the pandemic, but the crisis gave the RV market a boost as people realized a home on wheels was the safest way to travel during the COVID-19 crisis.

Last year was even more impressive, with revenue growing 27% to $6.9 billion. Most of the revenue growth wasn’t due to Camping World selling more RVs, though it did sell nearly 10% more than in 2020. The real driver here was rising prices for new and especially used RVs. Margins soared and net income nearly doubled to $6.07 per share. Did I mention Camping World only trades at 6x profit?

The new year will be more challenging without the unique tailwinds of 2020 and 2021. Analysts see a small increase in sales and a decline in the bottom line for the whole of 2022. This is where Camping World’s ambitious payout strategy comes into play. Buffett doesn’t necessarily place a high value on dividend investing, and Berkshire Hathaway itself doesn’t announce any payouts. It can still benefit from Camping World’s aggressiveness when it comes to returning money to its shareholders.

Camping World more than doubled its regular quarterly dividend over the past year to $0.50 per share — or $2 per share on an annualized basis. Two weeks ago, the company announced another 25% increase, putting it on track to post payouts of $2.50 per share this year. That’s a whopping 7.8% running yield. Camping World has also paid twice larger special dividends in the last five years. In short, Camping World is a worthwhile investment in many ways. It ticks the value boxes of most income investors and happens to be in a market that Berkshire Hathaway already knows all too well.

conflict resolution

The only speed bump here is that Buffett may have already delved too deep into the RV market. Would owning a diversified RV superstore concept – either directly or as a small shareholder – be a problem for a company that is already an RV manufacturer? Camping World also owns the Good Sam Club, the RV equivalent of the American Automobile Association (AAA) with more than 2 million card-carrying members. Will owning RV insurance be a conflict of interest for the Good Sam Club?

I don’t think so, and if anything, the synergies and opportunities are even more compelling. Buffett is already a pro when it comes to investing in RV stocks. Adding Camping World to at least one of the stocks in Berkshire Hathaway’s acclaimed portfolio is a good idea on wheels.

Rick Munarriz owns Camping World Holdings. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Camping World Holdings and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway ( B shares). ) and Short March 2022 $32 puts on Camping World Holdings. The Motley Fool has a disclosure policy.

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