There's an oft-repeated axiom of investing that says invest in what you know, and in this segment of the Market Foolery podcast, host Chris Hill and Motley Fool Asset Management's Bill Barker field a query from Eric, a fan who's looking to do just that. He loves camping and loves the equipment made by Thor Industries (THO +0.60%). But should he love its stock in the wake of the pullback that has trimmed away a third of its value this year?
Well, Eric, you came to the right place. Thor has been a longtime holding in the small and mid-cap growth fund that Barker manages for The Fool, so he's been keeping a close eye on it. He, thus, knows exactly why the former high-flying stock is in a slump right now and can break down the good and the bad of the recreational vehicle company's business.
A full transcript follows the video.
This video was recorded on Sept. 11, 2018.
Chris Hill: Question from Eric in Pennsylvania, who writes, "I love camping. Thor Industries produces great equipment. They have slumped recently. What are your thoughts on picking up some shares now?" At the beginning of this year, Thor Industries was up around $155. It has definitely pulled back. It's around $95 today.
Bill Barker: Yeah, a couple of things. I'll tie this into the hurricane issue, as well. Thor is something that we own. It was one of the top holdings in the small and mid-cap growth fund that I help manage with Charly Travers. This is something we've owned for a long time and has made a lot of money for investors over the last six, seven years. A lot less so this year. In fact, it's the worst-performing company that we own in that portfolio. Down 34% for the year.
Now, why is that? One, more than anything, it's because of the tariffs, the steel and aluminum tariffs. 25% hikes in that. This has as really landed upon the RV industry. They're still at record high sales for units, and they're having a good year as an industry. They're benefiting from the tax cuts. But the margins have really been impacted by this. Not to the extent that they're not still making record profit. Thor is making record profits this year, and the suppliers like LCI, Patrick Industries, also. But they're not making the profits that they were expecting to make at the beginning of the year, before the tariffs were implemented. That is most of what explains the stock price.
Additionally, the growth in the industry is not at the pace that it was last year. Again, it's at record highs for units, but it's growing more like 5-7% over last year's record high, rather than the 10-20% that it was growing in the previous two years. All of which is to say that my guidance on Thor -- which I won't give, it would be biased by the fact that we own it in the fund. But, we've also owned it for seven years and expect to own it for a lot longer.
Hill Great name, too!
Barker: Do you know why it's named Thor?
Hill: For the God of thunder?
Barker: No.
Hill: Oh. Is there another Thor?
Barker: The founders are named Thompson and Orthwein. It's the first two letters of Thompson and the first two letters of Orthwein.
Hill: They might want to consider telling people it's named for the God of thunder.
Barker: I think they let people assume that. And, they got there in their own creative way. Yes, it's a better name than Thompson-Orthwein would have been.
Hill: Yeah, definitely. Well done, guys!
