Is there money to be made in ... mobile homes?
Warren Buffett seems to think so. Earlier this decade, as the economy boomed and the Great Recession was still just a twinkle in Greenspan's eye, the CEO of Berkshire Hathaway
But even before that, other investors were seeing attraction in the twin trends of building cheap housing for those who need it, and manufacturing RVs (aka modular homes with wheels) for a baby boomer generation just a few short years away from hitting the road. These were the trends that inspired Motley Fool Hidden Gems to recommend buying shares of Drew Industries
Time to bail out?
Announcing the results, Thor Chairman Peter Orthwein took the opportunity to crow over the firm's "improved margins," driven by "cost-cutting and process efficiency." Thor's announced acquisition of Heartland RV last month promises to keep the revenues growing, which when married to improved margins should mean good things for profits as well. So ... why can't I shake the feeling that the investors who bid up Thor shares this week, instead have been unsnapping seat belts and bailing out with their winnings?
Here's why: As superb as Thor's profits appeared last year, free cash flow actually topped out at $88.4 million -- a good 20% below reported net income. Now don't get me wrong -- that's stronger cash flow than you'll find at industry standard-bearer Winnebago
In short: There may be money to be made in mobile and modular homes -- but I doubt there's much profit potential remaining at Thor.