Going Back into the RV Boom

After the previous week’s sell-off, markets closed a positive week with the Dow Jones up 0.76%, the S&P 500 climbing 1.19% and the NASDAQ rising 1.17%. The MSCI Emerging Markets Index jumped 3.07%.

Big gainers in your Bull Market Alert portfolio included B&G Foods Inc. (BGS), which rose 5.87%; Avista Corporation (AVA), which added 4.74%; NorthWestern Corporation (NWE), which gained 3.60%; Take-Two Interactive Software (TTWO), which jumped 3.55%; Healthcare Services Group, Inc. (HCSG), which recovered 3.41%; and the iShares MSCI Emerging Markets (EEM), which moved 3.07% higher.

Several positions moved back above their 50-day moving averages to a BUY. These include the iShares MSCI Emerging Markets (EEM), Healthcare Services Group, Inc. (HCSG), Avista Corporation (AVA), Allete, Inc. (ALE), B&G Foods Inc. (BGS) and NorthWestern Corporation (NWE).

Cirrus Logic, Inc. (CRUS), Masimo Corporation (MASI), Take-Two Interactive Software (TTWO) and Cantel Medical Corp. (CMN) all hit new 52-week highs.

In this week’s Bull Market Alert, I am recommending that you re-enter Recreational Vehicle (RV) parts manufacturer Drew Industries Incorporated (DW). Recall that you already booked a 25.08% gain in this stock when it hit its stop earlier this month.

Founded in 1962, and based in Elkhart, Indiana, Drew Industries Incorporated (DW) is benefiting from a massive secular boom in the RV industry.

After RV shipments dropped to a 30-year low in 2008, demand today is going through the roof. The Recreational Vehicle Industry Association (RVIA) expects a record number of RVs to be sold this year, with more than 400,000 RVs shipping in 2016 alone. That’s the highest number since the late 1970s.

A big chunk of this demand is driven by retiring baby boomers. And it’s about more than just favorable demographics.

With the rise of house and apartment rental websites like Airbnb, new retirees now have access to a wider range of vacation properties than ever before. Instead of locking themselves into a second home, baby boomers now have the option of vacationing in a wide range of properties. All the money not going into second homes is going into RVs.

Drew itself is growing spectacularly. Revenues for the second quarter and first half of 2016 hit $441 million and $863 million, respectively. Operating margins improved over last year’s quarterly operating profit by $26 million, or 77%. A year-on-year increase in operating cash flow of 206.24% closely matches its rise in earnings.

No wonder 10 small-cap growth and low volatility strategies I track closely are invested in Drew.

So buy back Drew Industries Incorporated (DW) at market today, and set your stop at $89.00.

If you want to play the options, I recommend the DW January 2017 $100 calls (DW170120C00100000), which last traded at $3.20 and expire on January 20, 2017.

Portfolio Update

iShares MSCI Emerging Markets (EEM) moved 3.07% higher last week. EEM is made up of over 800 stocks that provide a highly diversified global portfolio of emerging market holdings. This includes 26% in China, 15% in tech giant South Korea and 12% in Taiwan — with the rest of the basket covering India, Brazil and many others. EEM moved up above its 50-day moving average (MA) at the start of last week to become a BUY.

Healthcare Services Group, Inc. (HCSG) added a robust 3.41%. After appearing to bottom the previous week on its 200-day MA, HCSG has moved upwards over the past two weeks to break above the 50-day MA. HCSG also paid out a quarterly dividend of $0.1838 on Friday of last week. HCSG pushed higher to a BUY.

B&G Foods Inc. (BGS) jumped 5.87% to close out a strong week. Adding to upcoming gains is BGS’ hefty 3.34% dividend. BGS declared its upcoming dividend on Aug. 2 in the amount of $0.42. The ex-dividend date comes this week on Sept. 28 with a record date of Sept. 30. The dividend will pay into your account on the payout date of Oct. 31. BGS rose above the 50-day MA and is now a BUY.

Masimo Corporation (MASI) added 0.72% and hit a new 52-week high. Not only is this stock at a year-to-date high after a nearly unbroken run higher, but it holds a “Strong Buy” ranking from Zacks. Factors driving this company’s rise are a strong, expanding product portfolio and its non-invasive technologies becoming mainstream. MASI is a BUY.

Take-Two Interactive Software (TTWO) rose 3.55% to hit a new 52-week high. TTWO will report earnings on Nov. 11. Take-Two reported a last-quarter earnings per share (EPS) loss of $0.38. The upcoming consensus EPS estimate is $0.12 on revenue of $362.32 million. TTWO is a BUY.

Cantel Medical Corp. (CMN) added 0.20% since its inclusion in your portfolio. CMN continued its rise last week as it hit another new 52-week high. CMN will report fourth-quarter fiscal earnings before markets open this Thursday. CMN is a BUY.

Sincerely,

Nicholas A. Vardy