Believe it or not, there are still a few U.S. companies that do not rely on debt, manipulative accounting, and massive stock buybacks to generate strong earnings and a high stock price in today's overpriced stock market.
Some companies, like the one I'm about to show you, still make money the old-fashioned way: selling a well-made product, managing their balance sheet, and finding and keeping management talent for the long haul.
When investors find such a company, they should jump all over it....
I've found one that's positioned for the long term, both fiscally sound and virtually immune to economic cycles.
Indeed, this company's stock is a foundational buy heading into 2015...
Meet Elkhart Indiana's Thor Industries
Thor Industries Inc. (NYSE: THO) is one of the world's largest manufacturers of RVs (recreational vehicles). But their flagship is the iconic, all-aluminum Airstream trailer - a retro-futuristic fixture of American vacations for close to 80 years.
Thor was founded in 1980 by Wade Thompson and Peter Orthwein when they purchased privately held RV manufacturer Airstream. The company went public in 1984 and has grown both organically and through acquisitions since that time. It currently employs more than 9,400 workers, with 120 facilities in three states.
In addition to the iconic Airstream brand, Thor also manufactures the Crossroads, Heartland, Livin' Lite, Bison, Dutchmen, Keystone, and Thor brands of recreational vehicles.
Since weathering the 2009 recession that impacted the entire travel sector, Thor's revenues have grown at a compound annual rate of 25.9%, powering it to a record $3.5 billion in fiscal 2014.
During the same period, the company's net income has exploded at a compound annual rate of 135% to a record $179 million while earnings per share have motored forward at a similar 141.6% compound annual rate to a record $3.29 per share.
At just over $55.00 per share at the time of publication, the stock is trading at just under 17x earnings, in line with the broader S&P 500 but with an important difference - the company has no debt on its balance sheet and more than $300 million in cash.
Thor's Core Strengths Separate It from Its Competitors
Thor makes a point of differentiating itself from the crowd in a number of critical ways.
First and foremost, it does not engage any of the accounting shenanigans that other companies use to dress up their numbers, nor do they issue "pro forma" earnings.
It does not issue golden parachutes to its executives. It pays its executives for performance and has a thin corporate staff; only 42 of the company's 9,400 employees work at headquarters.
On the financial side, Thor has a debt-free balance sheet, tangible net worth of $746 million, $313 million of cash, and a market cap of $3 billion. Its pristine balance sheet has allowed for flexibility in its operations and investor-friendly behavior.
The company has used its outstanding fiscal position to consolidate the industry through very shrewd strategic acquisitions.
In 2013, Thor bought the assets of specialty equine trailer manufacturer Bison Coach for $16.9 million. In 2014, Thor acquired RV manufacturer K-Z Inc. for $55.3 million.
K-Z manufactures travel trailers, fifth wheels, and toy haulers under popular brands such as Sportsmen, Spree, Durango, StoneRidge, and Inferno, as well as Venture SportTrek and Sonic. The acquisition added 200 new dealers to the company's network with very little overlap.
Thor is investor-friendly: the company engages in careful stock buybacks, but unlike other companies, does not borrow money to finance them.
With its ample cash on hand and no debt service, Thor has managed to increase its dividend payout from $0.07 per share in 2010 to $0.27 per share in fiscal 2015, a 31% compound annual rate. In addition, Thor paid out two "special" dividends of $1.68 per share in 2012 and $1.00 per share in 2013. The current dividend yield is a healthy 2.0%.
Here's Our Next Move with Thor
About the Author
Prominent money manager. Has built top-ranked credit and hedge funds, managed billions for institutional and high-net-worth clients. 29-year career.