In this episode of Industry Focus: Consumer Goods, Emily Flippen and Motley Fool contributor Asit Sharma take a closer look at three lifestyle stocks with great brand equity, how they got a boost during COVID, and what's next for them. They talk about the companies' resiliency, adaptability, management, financials, and more.

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This video was recorded on October 27, 2020.

Emily Flippen: Welcome to Industry Focus. Today is Tuesday, October 27, and I'm your host, Emily Flippen. Today, I am joined by Motley Fool guru Asit Sharma as we discuss three of the hottest lifestyle stocks on the market today and think about what their businesses could be like in a post-COVID world. Asit, thank you for joining again.

Asit Sharma: Thanks a lot for having me, Emily. Really excited and confused to be discussing lifestyle stocks. [laughs] Not really; it's COVID-19, we should have been ready for this.

Flippen: I have to be honest. When you sent me the pitch for this episode, I almost felt like you should have included a trigger warning with it, because the first stock we're going to talk about, as part of this lifestyle basket, it triggers me. As a millennial, you know, I can use that term, I am triggered by this company. Fair to say, I have not maybe had the most wonderful past with my analysis of this company, but I'm interested to hear your opinion and your take on it.

Sharma: Well, Emily, before we hop into your story, I should say, Industry Focus is a safe space for you, so we can talk about this with our friends. We'll get through this. I'm eager to hear this story.

Flippen: I'm eager to tell it. It doesn't paint me in the best light, but I'll say it anyway. The company we're going to talk about first is Yeti (NYSE:YETI). And our listeners may be familiar with this company just from a consumer perspective, if not from a stock perspective, because they make really popular coolers and tumblers. They are a lifestyle brand associated with the outdoorsy-ness, let's say. So if you're going for a fishing trip, you're going for a picnic, you may include some Yeti products in that experience.

And the first time I actually talked about this company was back in December, I believe it was December 6, 2018, about one month after its IPO. And we have an internal meeting here on the investing team, people bring companies, and any other analyst who are interested in the company will join that meeting, we'll discuss it, and at the end of the meeting will give it a rank on a scale of one to five on a few different factors and then average out that ranking to kind of get a sense about how we feel about the company.

And Yeti -- granted I was the one who talked about it, so I colored many of my other analysts' opinions with my own opinion -- but Yeti is still the lowest-ranked stock we have ever brought to one of these meetings. I think it had just over a 2 out of 5 on that five-point scale. And it's actually up something like 200% or more since that meeting. So we, I really should say I, have been horribly wrong with my analysis of this company.

But as you know, Asit, when this company IPO'd, it was not the prettiest picture here. Lots of things working against it.

Sharma: Yeah, it looks different today, but go ahead. [laughs]

Flippen: Yeah. So I actually went back and I brought up my notes that I wrote down for the stock pitch, or I shouldn't call it a pitch, it was a stock discussion we had about Yeti. And it's funny reading through a lot of what I thought, including things like the fact that the entire executive team had turned over in the past two years, including its two co-founders. It was being controlled by a private equity firm called Cortec, which was really just milking the company for dividends. Their net sales from 2016 to 2017, heading into the IPO, actually fell 22% due to overstocking of their products, which led me to have a lot of concerns about not only just competition, as competition came in, but also management and how they were managing their own inventories. Their gross margins were decreasing.

And they were planning on using all of the IPO proceeds to pay their own debt. Over half of all their operating income was going to be paying interest on their debt, there was really nothing here that was redeemable, for me, about the company.

And I really missed the point, I focused on all these little details and I think I missed the bigger picture that was being painted behind the scenes, which was, everybody and their dog loved the Yeti brand. And I immediately realized my mistake, because as I said -- and I've talked for a while now, I apologize -- but as I said, we did this analysis, or I did this analysis at the very beginning of December 2018. When I traveled back to Texas for the holidays, I had realized I made a horrible mistake, because all of my friends for Christmas that year had gotten Yeti products. I mean, if I had $1 for every Yeti mug I saw, I would be a rich woman right now. I was thinking to myself, man! I really missed the mark on this.

And yeah, it's up, I just looked at the numbers in here, 240% since that meeting. Crazy.

Sharma: Wow! Well, Emily, I should say, you should have known better. No, I'm just kidding, you know why, I have a similar story to tell, [laughs] I have a confession to make. I did something very similar, so this was -- I'm looking at the dates, but about a week before your meeting, I did a deep dive on Yeti with Vince Shen, who, regular IF listeners will remember was once a host on the Consumer Goods section. We tore the S-1 apart, [laughs] and we came to a lot of the same conclusions. The bad pun I made at the end of that show was, "Don't buy this dog just Yeti." You know, wait a few quarters and watch it, because we looked at the debt load, and we said, [...] And it's basically being managed by this company Cortec, like, a private equity company.

I gave Cortec some points, because they had hired away Dunkin' Donuts CFO, a really smart gentleman named Paul Carbone, he's still there today. I admired his work at Dunkin' and I thought, you know, he probably can help them scale their sales. And they have this thing where they want to go more direct to consumer. They started out as mostly, they call it wholesale, but that just means that their stuff is ending up in retail locations. For me, the first time I saw Yeti products, it was in my local Ace Hardware. They had this big display, and everything was expensive, [laughs] from the coolers to the $20 and $30 mugs. So we gave it some points for the brand, but we missed the brands.

Before the taping that day, we had a 15-minute conversation with Austin Morgan, frequent producer of Industry Focus, man behind the glass, and Austin was going on and on about the brand. He told us, "You guys have to look at its Instagram following, this is going to be the lifestyle brand for coolers for my generation." We should have listened to Austin; I should have listened to Austin. I don't know if Vince ever bought [laughs] shares, but I didn't.

And the second mistake I made, Emily, was not really paying attention to it, because it's been sort of a sleeper stock. You don't hear a lot about it in the market, but it's gone up. And like you said, a lot of that has come this year in COVID, but since its IPO, it's been [laughs] a multibagger. So I'm in the same boat with you there.

Flippen: Yeah, it's funny you say that it's a sleeper brand, because I'm not sure if we've even covered it on Industry Focus since that coverage of its S-1 that you did with Vince. It really has been a monster. And when I said that 240% since that meeting I had, it's worth noting, 65% of that is just this year alone, as more people spend time outside. But really, that doesn't paint the full picture. It was doing well even before the pandemic.

I think one of the things that I just had as a footnote in this report, which I should have focused more on, one of the things that you noted was their renewed focus both since the IPO to today, on direct-to-consumer. When they IPO'd, in their S-1 they had noted that direct sale revenue had grown from 8% in 2015 to 30% of revenue when they were IPO-ing, and that's up to about 42% of sales today. So this is a number that just continues to expand. But in addition to just being really successful in wholesale and direct to consumer, what else has made this company such a beast since the IPO?

Sharma: Yeah, one of the things is, it's really chosen the right channels to be in. So for example, one of the ones that you mentioned when we were prepping the show is Dick's Sporting Goods (NYSE:DKS). We're going to talk, incidentally, about Dick's later in the show, but in 2019, Dick's represented some 15% of sales. So to be in Dick's is a really great place to be, because for people who are shopping lifestyle products, remember Dick's isn't just sporting goods, although that's the name, it's got a lot of camping gear, it's got a lot of the outdoor-lifestyle type of gear that you want to buy. And so, being front and center there really helped it extend the brand. And that has something to do with the overall strategy.

This company is trying to move outside of, basically, the South and Southeast, where it originated. There's a lot of white space in the rest of the country. And so being in a major big-box retailer like Dick's has really helped it. Also, they've been successful online in the Amazon Marketplace; that was 13% of sales in 2019.

One of the advantages of being this, sort of, social brand -- and I'm sure that there are tons of listeners out there who probably first encountered Yeti through social media -- is that it's pretty easy to extend that brand if you're using so-called influencers [laughs] -- I had to put that little dig in -- so-called influencers. If you're using that to extend your product recognition, which Yeti does an extremely good job of. Then it's quite easy to expand your geographical footprint. So they're not just in the U.S., but they've sort of leveraged these social imprints; they're in Canada, Australia, New Zealand, Japan, and Europe. So I think that these are some of the things that the company has been successful in. Maybe I discounted that as well, just reading through that S-1, that they'd be able to capitalize on these strengths, get that big retail footprint out.

I should mention just one more thing: They've got a partnership with Lowe's, so they're going to have more of a presence in Lowe's, the big do-it-yourself retailer, that just got stymied a bit by COVID. It was supposed to gear up this year. So I personally haven't seen a lot of Yeti presence in Lowe's stores when I'm in them, but I think after they manage some supply chain issues, after we get a little further from the worst part of the pandemic, you're going to see more of that in a really great place, I think, to feature the brand. So they're still focusing on that wholesale/retail presence, as much as they want to increase the direct-to-consumer sales.

Flippen: It's funny that you talk about the company using influencers to, kind of, expand its presence. I think that's actually where emotion has gotten in the way of my investing in the past was, I remember during the initial research on Yeti and being very turned off at the company, because I would find impartial reviews on places like YouTube or people were showing how long they could leave ice in coolers and how long the drinks would stay cold and to what temperatures. And for the large part, people were doing impartially, were finding that Yeti was just as good, maybe a little bit better, but not $600 better, [laughs] just as good as coolers from their competitors. But then you'd have these influencers who are wearing Yeti hats and Yeti T-shirts, talking about how amazing the Yeti cooler is, how all their stuff is cold constantly or warm, if you want to keep it warm. And I really discounted that, and it was simply because I, as a consumer, was turned off of it, not giving enough credence to the fact that so many loyal followers of Yeti really enjoyed the product.

But without me droning on anymore, I have one last question for you about Yeti before we can move on to the next lifestyle company we'll discuss. And I want to talk about Cortec today. I was convinced, when it IPO'd, that Cortec was using it as an exit strategy, that they would sell out the moment the lock-up period was up. That really wasn't the case. They held onto their position of around 34%, up until earlier this year. They now own less than 1% of Yeti stock. They sold out throughout the entirety of this year.

They held on for five-plus years here. Do you think this was part of their exit strategy, this was planned from the beginning, or do you think they see the writing on the wall in some sense?

Sharma: Man! That's a great question, Emily. You know, I would say that they're probably caught -- and I would be too if I was in this situation. So remember this is not a company that just, sort of, was a founder, this was the primary founder of the company, and they have all the risk in it with a great stake, and they've got the opportunity to realize their investment here, with the stock doing so well. And especially with this unforeseen COVID boost, which has only jacked the stock price up more, it's a tough decision.

You know, I looked at the recent proxy statement, I think that was in March, and they still held their share. And then you pointed out that since, so it must've been since March, [laughs] during COVID, they've sold out. So I think it's a little bit of both. I think we really shepherded this company along. They still have a member of Cortec that sits on the Board of Directors, they're very friendly with the co-founders who -- one of the co-founders has some shares, I think, 3%, 4%, but isn't actively involved, the other shareholder -- so, these are two brothers, the Seiders brothers; Ryan still owns 4% of the shares, and he's not involved; and Roy Seiders owns about 6%, and he sits on the board of directors. Cortec is still friendly with all of this group, but I think they decided, look, this is probably the opportune time to reap the fruit of a lot of work.

Because they also, you know, as I mentioned, they helped the company make a lot of great decisions, and they helped the company decide that direct to consumer was going to be a focus. So they probably want to realize, not just their investments, that equity on their investment, but the fruit of their hard work. And I think there is a little bit of what's going to happen after COVID and things are going to get tougher, [laughs] so maybe this isn't a bad time to walk away. I think it's a little bit of both.

Before we move on, what do you think? Just curious, what's your thought?

Flippen: Yeah, this is hard for me as well. Yeti has had a monster year, I think Cortec has been wanting -- I mean, you don't IPO a company unless you are at some point planning on getting the liquidity that comes with it; otherwise you just continue to milk the dividends. I do think the run-up we've seen this year probably catalyzed their decision to sell. I'm surprised they sold out of everything so quickly, though. Maybe they have some negative thoughts about what the holiday season could look like, but typically, this is a seasonal business that benefits a lot, not just from the Summer months, but a lot of people give Yetis as gifts. It's a very giftable brand. I'm a little surprised they sold out before the holiday season; I maybe would have waited to see if there is a postholiday bump there. But again, maybe this is them saying, we've held on for five-plus years, we're probably not going to reap that much value by holding on more, plus we have the uncertainty of what this COVID-impacted holiday season will look like. So I find myself lying somewhere in the middle, I suppose.

Sharma: Yeah. And time will tell what that decision looks like, if they should have maybe just sold out half or if it was a good time. The last, last thought is that it's probably too, like, it's time for the robins to leave the nest. We helped this company along, they're doing well, let's pull our money out and put it somewhere else in another new opportunity, but we'll see how this company does. Certainly, it's got opportunity ahead of it if you're a long-term shareholder.

Flippen: And you mentioned, as we were discussing Yeti that one of their biggest partners was Dick's, which is another lifestyle company that we're going to discuss. And I have to be honest: Before taking over the Consumer Goods host chair here, Dick's was a company I never thought about. But as I'm learning more and more about it, as I'm discussing it with you, as I've discussed it with Dan Kline in the past, this is a company that I've realized [laughs] has really become, what I'm going to call the Best Buy of outdoor sporting, outdoor entertainment.

The same reason that people thought Best Buy was doomed, because it was going to be destroyed by Amazon, I think it was easy to say that all the stuff you can get at a Dick's you could order online. But, man! Do people just love the Dick's experience.

Sharma: They do. And I will say that, personally, whenever I've walked into a big sporting goods outlet, I wonder like, is this going to stick around. Especially with Dick's Sporting Goods, because they're the biggest and baddest around, at least in my area. And I've been in and out of these stores throughout the years, because I have three teenage sons -- actually, to be honest one is now in his 20s, but had three younger guys. And I was constantly buying sports equipment for them, they're all three very active and often in Dick's. I just wonder, like, how are these guys going to stay in business?

Now, conversely, I never had any problem understanding why an REI, [Recreational Equipment, Inc.] which is actually a cooperative, it's not a publicly traded company, why they would stay in business, because I love REI. I love to walk into those stores. Their stuff is a little expensive, but I totally get it, I mean, they are geared toward people who love quality stuff, you know, for hiking, for trekking, for camping, just outdoor stuff, in general. And for the Dick's customer, I think that's part of the reason. But you're right, they are another, sort of, sleeper stock that is growing on investors, because they've proven to be resilient. Amazon didn't take their business away, and their customers just love to go there, so they're a stock we should pay attention to.

Flippen: Now, before we talk about how great their business has been, even this year alone, but also prepandemic, I want to add another level of negativity [laughs] before we bring it somewhere positive.

Sharma: Yeah, bring it on. [laughs]

Flippen: Part of the reason why I was so not interested in Dick's was because, in my mind, there was nothing different about Dick's. First of all, they're in malls, and malls have been struggling. But there is nothing different about the Dick's experience and the experience that I would get if I went to a place like Academy Sports + Outdoors, do you remember Academy?

Sharma: Yeah, vaguely. We don't have them as much in my area, but I've been in them before. So it's very similar I would say...

Flippen: It's similar, but Dick's are nicer. I grew up near an Academy that then went out of business when the company declared bankruptcy. But we found out earlier this year, if my memory serves me right, that Academy Sports + Outdoors is in fact planning on going public, which blew my mind, not just because they had a business that they thought could be warranting of public equity but more that the business was even in existence in the first place.

At some point maybe we need to do a deep dive into that company's S-1. I'm pretty sure it's just as disastrous as you [laughs] would imagine it would be. But in my mind, Academy and Dick's were maybe on the same level. I realize how wrong that statement is now, especially with their most recent earnings report, but I think a lot of consumers and maybe some investors have even written off the company, given it that mindset of a legacy retailer.

But with that level of negativity added, now let's talk about the positive, because everything I just said has not by any means been backed up by the numbers that Dick's has been putting out.

Sharma: Yeah. So I'm going to read, again, from your great notes, so listeners can get a feel for how successful they've been recently. They had their highest quarterly sales and earnings in this past quarter, $2.7 billion in sales. And that converted to about $3.21 of earnings per share. Same-store sales, comps, increased to 20.7%. And this is even with about 15% of stores being closed during the quarter. Now, I think I read on the call transcript that all stores are now open, so this next reporting period, we'll see what that looks like, but that is pretty amazing performance, Emily. And they did that by bumping their online sales up almost 200%. Online sales increased 194% year over year; about half of that was through mobile.

And I will say now, Emily, we've both followed a lot of consumer goods companies this whole pandemic, and I will say, that's sort of near the top of the range. Everyone who's still [laughs] out there and alive as a retailer, is reporting some kind of great e-commerce growth, but this is pretty impressive. This is like Target level. Target had about the same type of increase. And doing the same things, just being ready to service curbside pickup. So to me, that was really, really impressive.

Flippen: I just love the fact that the pandemic has catalyzed technological change for companies that maybe would be worse off without it. I think the move for consumers to be aware of mobile and curbside pickup, these sorts of advances, is great, plus the investment that we've seen from companies like Dick's. And to expand their relationship with the customers, meeting them where they want to be met, whether it's on mobile, whether it's getting picked up, whether it's ordering online, or even still coming into stores, Dick's has really hit the customers on all fronts, and I love that.

I think where I find myself scratching my head is about how they keep it up, not just thinking about -- you know, the trend that we talked about a couple weeks ago with the really impressive comps, next year it's never going to be this impressive even if Dick's is doing a great job. So it's important to be cognizant of that. But I do wonder just how many people they retain. So many, what I would imagine to be, purchases that people are making are one-time purchases, because they spend more time outdoors over the past few months then they have in any year prior. I don't think these are permanent lifestyle changes [laughs] that suddenly people are going to be making repeat purchases from Dick's. That makes me a little bit nervous about how many customers they actually retain, but their brand has certainly improved.

Sharma: Yeah. And I think this is one of the things that, as an investor, you have to pay attention to that sometimes a brand will prove you wrong in your thesis, we just talked about the strength of Yeti's brand, and I'm guessing that some of the customers that Yeti is picking up are going to be sticky, just because their pull is so strong.

I'm sort of agreeing with you, not so much so as Dick's, so they have, like, what, more than 70% of sales came through members who are enrolled in their loyalty program, the store card. Just want to say, in a personal note, [laughs] that's a very clunky program if anyone has ever used it. Sometimes it can be hard to just figure out how many points you have and then you'll take the little fob on your keychain that you thought worked, and you'll have to sit there for five minutes while they go through four or five different screens and figure out, oh, no, that's with the prior registration. I know this just can't be me, because I [laughs] talked to a few friends who've experienced this similar. When I used to coach soccer, we had the same experience.

Now, having just dissed their loyalty program, we should say that their aim is to get more people enrolled in that and to keep those numbers up. Hopefully, they'll stick around. But I do want to say, this is maybe one to be more careful of, they may not be capturing as much permanent market share for the reasons that you listed, Emily. And I also want to say that, look, last year, their stock was up almost 60%, in 2019, so the stock has already had a good run, and that was mostly because, if you all remember this, there was a big controversy about removing firearms from various retail chains --

Flippen: Oh, there was, wasn't there?

Sharma: Yeah, Walmart went through this, and Dick's, they took a stand. They said, look, we're just going to cut down our hunting stores within our stores, we're going to remove firearms from our stores. It was controversial. A lot of their fan base in the South, where I live, which is hunting culture, the further South you go, and to the Southwest, they didn't like that. But you know, what it allowed them to do, was use floor space for items that were selling better and had higher margins, and they got a boost out of that. I don't know how it all fell out with their customer base, but I do know that Wall Street got excited, investors got excited about the potential for them to, for example, move their private brands, which, they have a few private brands, into the spaces where the hunting goods were. [laughs] They realized so much last year, and now they have this COVID boost. So I'm wondering too, Emily, does the stock just return to earth a little bit next year? Nonetheless, it's been interesting to watch.

Flippen: Yeah. Definitely one we'll have to keep our eye on.

And the last company you had on this list is a company whose name would imply that they're doing something just amazing, has to be the coolest company to ever exist. I had never heard of it before you put it on this last, Asit. Needless to say, they are maybe not [laughs] doing business that is as cool as their name. The company is Thor Industries (NYSE:THO). And tell us what this business is, because I'll tell you one thing, I spent way too long just trying to get an understanding of what Thor Industries does.

Sharma: Sure. Well, you know, Thor Industries supplies a lot of the CGI for different blockbuster films. You guys maybe have seen the character Thor at the movie theaters? ... No, I'm joking.

Flippen: [laughs] I was just checking my notes, I was like, oh, my gosh, I researched the wrong company. I was sitting here thinking like -- [laughs]

Sharma: I know, right? That is such a great name. That's what it sounds like it must do. You know, like, I want to say, it was, let's see, I'm trying to remember the name of the production company that was spun out of Star Wars -- Industrial Light & Magic, that's what it is, sort of like that, Thor Industries.

No, Thor Industries is actually an RV manufacturer, a recreational vehicle manufacturer. And they basically have two components. One are towable RVs, so those are RVs that you can hitch to your car and take to a campsite. And they also have the big RVs, which are self-driven, known as motorized RVs. And as you pointed out, Emily, in our prep for this show, they are the brain behind a really, really cool iconic brand, which is the Airstream brand, which has been around for a long time. And that's, sort of, if you had to name one RV brand that most people would have heard of, besides Winnebago, it would be Airstream. So that's, sort of, what they do.

They are also expanding into Europe. I should say, before I flip this back to you, they purchased a European manufacturer based in Germany called Erwin Hymer Group, I believe it was last year, for about $1.8 billion; that was a stock transaction. And that company has provided them with a footprint into Western Europe, which is really heavily into RVs as a recreation for the summer. So that's, sort of, an overview of what Thor Industries does. And, yeah, unfortunately, they are not some cool CGI company. [laughs]

Flippen: [laughs] Well, for what it's worth, I think the Airstream is pretty cool, not because I know a lot about legacy RV brands but because recently, especially during the pandemic, as people have attempted to change their living situation to be more adaptable to whatever their current life looks like, Airstreams have become a really popular flipper RV. People emptying out the insides of the Airstreams to make a towable that they can live in, and turning them into tiny houses. So I'm aware of Airstream simply because of that, not from the RV angle. Not that I'm planning on living in an Airstream anytime soon, but people do do that.

I'm going to need you to paint me a compelling picture here, because when I looked through their most recent 10-K, their most recent annual report, that was released last month, man, did things look gloomy. Looking at their towable segment, it fell 10% year over year, 31% fall since 2018 in terms of revenue. The same is true for motorized vehicles, those fell 16% year over year, 35% since 2018. The only segment that was growing is the European segment, because of that acquisition you just mentioned. When I look at their revenue falling like that, this doesn't really make me excited as an investor.

Sharma: Right. And yet the stock is up this year and was up last year. So what's going on here? The story is that the RV industry was enjoying a boom time, really, that culminated in about the 2017 to early- to mid-2018 period. And this company, other RV stocks, like, Winnebago, were soaring. They reached their peak backlog in the middle of 2018; Thor reached its peak backlog. At the very same time, dealers, so when you drive by on the interstate and you see, like, gosh! a couple of hundred RVs [laughs] lined up on the side of the road, RV dealers, their lots were full, they were bursting at the seams.

And then what happened was something very curious. The economy at large was still doing OK, but consumers, which had been fueling all this production, they just suddenly started pulling back in 2018. And by the middle of the year, it was apparent that sales were going to decrease. And what happened was, dealers told the big RV manufacturers, look, we've got to rationalize our own inventory, we got to work the inventory on our lots down, which caused just this whole chain reaction. Sales declined for Thor, and they've really been declining since.

And only in the last quarter, just before COVID, so this is [laughs] two quarters ago, Thor and Winnebago and other smaller manufacturers finally said hey, we think that dealer inventory rationalization is over. Our backlogs have been worked down, we're ready for the consumer to come back. And so, while we're still seeing some effects from that peak in 2018, suddenly, consumers are hitting the road. They want to buy RVs, they want to be out. And speaking of Instagram with Yeti, they want to have hashtags like #vanlife [laughs] and show what they're up to. So it looks like a really good picture again.

Now, here's the caveat. I had written about Thor at the beginning of 2019, because I thought it looked like a good buy. Investors were really down on the stock, and it was selling at a very cheap forward price-to-earnings multiple. It was after that really big glut of inventory and backlog in 2018. Stock has done pretty well since then; it's up about 77%. Not because I'm any genius, but it also got a boost from COVID. But the question is this, Emily, and I'd love to hear your thoughts on this, the question is, are we just headed toward another peak all over again?

Their sales could increase over the next couple of quarters, because now the consumer is back. So these declines that we're seeing are probably going to level out. And management is talking about, they're working supply chain issues, those are going to be smoother. They'll produce more sales, are going to grow. Backlog has hit a record all over again because of people who want RVs due to COVID-19, are we just looking at another peak? What if consumers suddenly disappear again? I think it's a little more shaky proposition than it looks. You know, the stock is doing well. You look at what management is saying, it looks like a company you can still buy today. The multiple isn't that high. But there could be some hidden danger here [laughs] all over again. What are your thoughts on that?

Flippen: I tend to think that we are headed toward another peak. And maybe this is me throwing back again, like you said, to Yeti, where I discount things based on my own personal biases too much. I am afraid that I could be doing the same thing in this scenario, but it's really hard for me to imagine that RV life, van life, Airstream life, whatever it may be, becomes a permanent shift in our economy and the way that we like to live our lives. I just happen to wonder if it's simply because of the pandemic and that demand doesn't somewhat normalize when the situation of the world has normalized as well.

But the reason why I think that, that is where I tend to go. I think the good counterargument to my statement there is that housing has gotten so horribly expensive, the demand for housing is at an all-time high, while the inventory of houses are at an all-time low. I'm not sure if that's entirely accurate, but it gets the gist, which is to say, the demand certainly outstrips the supply of houses right now. And I don't see that changing over the short to medium term, which means that people who don't want to rent or are in a position where they can't rent, they want to have some ownership over where they're living.

I jokingly said it at the offset, but the people who are converting Airstreams into tiny houses, that are buying RVs to travel and potentially live in full time, these are people that, hey, maybe they're just ahead of the curve. And maybe people who can't afford housing have been priced out of the market or simply can't find housing that fits their lifestyle, maybe they move toward RVs, and if that is the case, I can see a sustainable shift in demand for things like RVs that could permanently impact Thor.

I'm not sure I'm ready to make that bold statement, so that's why I tend to fall on the former point I made, that I think demand would normalize. But I don't want to discount the possibility of something like that happening.

Sharma: Yeah. Sure. And to the credit of the industry, we should also say that long term, there are some tailwinds that the industry likes to point to, which I think are valid. The first being that, surprisingly, the demographic of people who buy RVs is actually becoming more diverse and younger. You might think it's just something that old people do, but younger people, millennials especially, they are very much into spending money on experiences rather than things. And an RV is a great gateway to experiences, so that's a thing you might buy if you favor experiences. And we've talked about this on Industry Focus over the years. So that is a long-term tailwind for the industry.

And also, the purchaser is becoming diverse. So Thor, Winnebago, these other companies I've mentioned, they all are tracking diversity of first-time entrants into the RV industry. So African Americans, Hispanics, again, the younger age group, there's a more diverse set of people that are buying RVs. And so the industry sees that there's a lot of expansion in the total addressable market when you look at it as a group of people who are buying the big vehicles. So yeah, I think there's something to be said for that.

It's just hard at this point -- I'm looking at Thor's price-to-earnings ratio on a forward basis as we speak. And my chart says that it's about 13 times forward earnings, but we have to take that with a huge grain of salt, because No. 1, earnings have been really volatile with both the production changes, because of that inventory peak, and also supply chain issues with COVID-19. So first of all, that might not be as cheap as it looks.

But second of all, you know, this company is in a competitive space. There are any number of other competitors always at the ready. The way that it's expanded, Thor, has been through acquisitions. So it's bought not just EHG in Europe but other smaller producers along the way. Does the industry just consolidate to the point where how much will this one company, which is already the world's largest now that it's acquired EHG, how much more can it grow? So there are some reasons to be a little skeptical, even though it's been a popular stock this year with investors because of this whole lifestyle shift. I don't know, I'm going to probably pass on this one as an investment. I will continue to follow it, [laughs] and write about it, but I don't know.

What about you, would you buy it today, Emily?

Flippen: Oh, at the risk of making another Yeti-sized mistake, I also feel like I'd have to pass on this opportunity. But I will not be passing on continuing to watch those mini documentaries people are posting on sites like YouTube converting Airstream into houses; that's very cathartic. If you're like me in a one-bedroom apartment for the past nine months. [laughs]

Sharma: I'm going to continue to dream about buying one of these vehicles. I think that'll be my investment. [laughs] So there you go.

Flippen: [laughs] Well, Asit, thank you so much for coming on and sharing your insights, as always. I know I appreciate it, and I know our listeners do as well.

Sharma: Absolutely. Thank you, Emily. It's always fun to hop on and listen to your insights and gather wisdom from you as well. So thanks again.

Flippen: [laughs] And listen to me complain about Yeti for half the show, yeah.

Sharma: [laughs] It was fun when you griped. I have the same gripe. I wish I had bought shares in 2018, but there's always opportunities in the market.

Flippen: Industry Focus: where investors come to gripe. It should be our new motto. [laughs]

Sharma: Love it.

Flippen: And, listeners, that does it for this episode of gripe focus -- I mean, Industry Focus. If you have any questions or you just want to reach out, you can always shoot us an email at IndustryFocus@Fool.com or tweet at us @MFIndustryFocus.

As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against any stocks mentioned, so don't buy or sell anything based solely on what you hear.

Thanks to Tim Sparks for mixing today's episode. For Asit Sharma, I'm Emily Flippen. Thank you for listening, and Fool on!

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.