Winnebago: A Contrarian Play

Higher gasoline prices have stopped Winnebago (WGO) in its tracks. The leading manufacturer of recreational vehicles has seen its stock price remain stagnant for two years. What's more, sales and profits are expected to decline slightly in the current fiscal year.

But all the bad news -- and more -- is reflected in the stock's price, says Tom Putnam, co-manager of FAM Value fund. RV owners, he says, don't drive their vehicles as much as they think they will. The average RV covers just 6,000 miles a year. And Winnebago makes mainly high-end RVs bought by people who can afford high gas prices.

The numbers are enticing. If you reduce the stock's price, recently $33, by the $4 a share that Winnebago holds in cash (it has no long-term debt), the shares trade at 15 times estimated earnings for the fiscal year ending in August. Analysts, on average, figure that Winnebago will earn $1.94 per share for the fiscal year. Winnebago's return on equity is a sizzling 28%. And Putnam says the firm's management team is first-rate.

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Demographics power the firm. The number of people older than age 50 -- the RV industry's key age group -- will rise by four million annually through 2030.

--Steven Goldberg