The RV Covid-19 Investment Phenomenon – Real Value or Really Volatile?

The current Coronavirus pandemic has produced many confusing signals for the investment community. Apart from the obvious restaurant, airline and hotel industry dynamics, there has been a large focus on RV and camping activities. As many proponents say, you do not need to sit next to anyone you do not know in an RV, you can fend for yourself in  your own kitchen or campsite and still see the sights and enjoy the wide open spaces. It seems to be a natural answer to all lockdown woes. However, will this new-found enthusiasm for self-sufficiency be anything more than a temporary bubble and how is this industry being viewed by asset managers and hedge funds? The data seems to be pointing one way in terms of direction…. Or is it?

Let us analyze two stocks in particular – Thor (THO) and Winnebago (WGO). These can be compared by using currently available institutional data and by using Hazeltree’s unique Community-based dataset, both accessible on the Hazeltree platform.

For WGO, tracking the market price against the institutional on-loan security volume, appears to confirm the enthusiasm being generated for self-sufficient holiday travel and living with the former going up significantly and the latter making as big a move in the opposite direction.

Similarly, the chart for THO, the owner and manufacturer of such brands as the prestigious Airstream brand, exhibits similar dynamics of market price against stock on loan.

Now this all seems anecdotally sound but does it tell the whole story? Remember the institutional flow reflected by Astec volume only takes account of that wholesale side without any allowance made for the self-contained retail asset transfers taking place within the hedge fund community ecosystem.

In the latter community, for WGO, there has been a counter-intuitive move in the long-short ratio reflecting increased shorting in recent months although it has been accompanied by a more pronounced long holder bias as well.  So, this is a mixed message in terms of where the industry is going over the last 6 months.

The market dynamics are even more obfuscated when looking at indexed changes in the long, and net positions within that community over the same time period.

Across the hedge fund community holders of THO however, it is slightly clearer, with a definitive move to the short side as seen in the long/short ratio and the signs of a higher short holders score after an initial decrease in the early months of the virus crisis.

And clearer still when it comes to the indexed long and short holdings over time…

Similar stories and statistics are seen for other market participants such as Patrick Industries (PATK), LCI Industries (LCII) and Camping World Holidays (CWH).

The appeal of the freedom and safety of an RV vacation is definitely a second and third quarter phenomenon. It would appear however that the professional investors on the buy-side are viewing it more as a 2020 fad with the potential to return to the status quo. Borrowing the securities is still relatively inexpensive as they are all at GC rates of around 20-25bps fee so short positions can, for now, be maintained fairly cheaply. It remains to be seen what sort of an impact a robust global vaccination program will have on the industry in the Summer of 2021 and whether the desert parking lots currently occupied by airplanes will be replaced by hardly used RVs.