What happened

Shares of RV-makers Winnebago Industries, Inc. (NYSE:WGO) and Thor Industries, Inc. (NYSE:THO) were getting their tires slashed Friday as Northcoast Research downgraded both stocks to "Neutral." As a result, Winnebago fell 9.2% and Thor was down 8.4% as of 3:17 p.m. EST.

So what

The research firm lowered its rating on the two leading RV companies as it said that dealer inventory was at an "unsustainable level." Friday's sell-off follows a more modest slide in the two stocks on Thursday as Thor lost 3.3% and Winnebago gave up 7.4%, so jitters may have already been building about a sector that had seen huge gains over the last year.

A camper van with bikes attached to the back driving down a beautiful scenic road.

Image source: Getty Images.

Northcoast analyst Seth Woolf also called it a crowded trade. His initial comment seems to indicate that sales at the retail level are slowing and both companies may need to offer discounts on products or cut their production to match lower demand if it is indeed moderating.

Now what

Neither company is expected to report earnings until March, so investors will have to wait to see if Woolf's assessment is accurate. RV's are a highly cyclical business and with the stock market roaring, additional savings accruing for businesses and consumers from the new tax law, and baby boomers continuing to enter retirement, the macroeconomic climates seems favorable to Winnebago and Thor.

Both companies have seen revenue and profits surge in recent quarters, with the help of acquisitions, but still trade at reasonable P/E ratios under 20. Considering those factors, it seems like the recent sell-off is overdone.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.