The Great Outdoors: The Next Investing Megatrend
Sometimes, investing ideas appear at peculiar times in the most unexpected places. As everyone worries about the next installment in the seemingly never-ending Federal Reserve’s rate hike cycle, my contrarian streak is telling me that we may be in the early stages of what could be the next stealth macro trend in investing.
As a result, like an increasing number of Americans I’m heading to the great outdoors, especially with my investment dollars.
From YouTube to Your Portfolio
I’ve been bitten by a surprising bug. No, not a real bug. I mean I’ve become interested in what for me was an unexpected guilty pleasure: binge-watching camping videos on YouTube. It started harmlessly enough one night when I was looking through my usual haunts, guitar and music-related videos and information. That’s when I stumbled onto an interesting fellow named Mav, who amazingly had millions of views and subscribers.
Mav specializes in camping in interesting locations utilizing his growing fleet of custom campers and usually features the detailed crafting of some tasty gourmet dish as a part of his repertoire. He is very entertaining and the truth is that there are worse ways to kill an hour at the end of a busy day.
Sure enough, YouTube’s algos figured out I was hooked and a guy named Steve Wallis, who also has a huge following, started popping up on my feed. I clicked on one of his videos and I became an instant fan. Steve’s specialties are stealth camping and camping with household items. Where Mav is somewhat sophisticated, Steve is a down-to-earth guy whose best videos are those where everything goes wrong.
I’ve discovered others as well. One of them is a South Korean recluse named Fish13, whose “glamping” gear and locations rival almost any hotel room and resort I’ve ever stayed in. Apparently, his own digs, as referenced in the video link highlighted earlier in this paragraph, could pose a challenge to the Bat Cave.
As an aside, if you’re interested in reliable camping equipment information and useful survival tips, you may wish to check out the Outdoor Gear Review channel. In addition to offering many entertaining episodes featuring great storm camping action, it’s an excellent informational guide for those who may be considering buying camping equipment.
Finally, if you’re looking for eye candy locations and a really laid-back vibe, you may want to check out Lone Wolf 902.
That said, as familiar readers may be aware, most of what I do, watch, and consider ends up becoming an investing idea. Some of my best returns ever have come from something I saw as I drove past an establishment of some sort.
A perfect example is my investment in homebuilder stocks over the past couple of years. The idea started when I began to notice large numbers of out-of-state license plates on the Dallas Metroplex freeways while driving to work.
On the other hand, it’s not that easy to find camping stocks which are not pigeon holed into the types of investments that you’d expect such as RVs and maybe sporting goods. As a result, it takes a bit of thought to come up with a potential stock which reflects what’s happening in the world in this regard, especially when you’re looking for the stock of a company that has not already experienced a big move, but looks ready to break out.
In my premium service, Profit Catalyst Alert, I’ve now recommended two outdoor/camping related stocks which are doing well. Otherwise, it’s been a challenge, especially since there is no exchange-traded fund (ETF) that specializes specifically in this sector.
But as I kept digging, I discovered there are some interesting companies that specialize in camping gear, outdoor activities and related accessories which are worth keeping an eye on.
General Population Trends Suggest Long-Term Growth
I am not alone. The macro trend for outdoor activities is steadily rising. According to recent data:
- 50% of the U.S. population participates in outdoor activities;
- The number is expected to continue to climb based on current projections;
- The number of new campers grew by 9 million people in 2021;
- The number of fishing and hunting licenses issued continues to grow;
- Millennials and Generation Z are increasingly interested in RVs;
- Surveys show that camping is less expensive than traditional vacationing; and
- You can even book a camping spot online.
Source: American Outdoors and RV Industry Association
American Outdoor Brands and the YouTube Connection
One of the most interesting companies in the sector is American Outdoor Brands (NSDQ: AOUT), a company that specializes in outdoor gear for hunting, fishing, camping and personal security products for outdoor enthusiasts.
The stock isn’t in my usual ballpark, because its market cap is less than $150 million. However, it’s a bellwether of sorts for the special niche in the sector that seems to attract people like me to Mav, Steve Wallis, and the growing cadre of YouTube campers with millions of followers.
The most recent earnings report, released in February 2013 was well above expectations as the company reported 14% sales growth, especially fueled by online sales growth of over 170%. In addition, the company forecast sequential sales growth of 12% and 22%, respectively, in the next two quarters.
The stock is trading at a reasonable 17 times earnings and its revenues are variable, as you might expect for a company whose main busy season may be the summer and fall. But it is a well-managed company and it has beaten earnings expectations for three out of the last five quarters. All of which suggests that it’s not too far from its sweet spot.
What’s it Going to Take to Reach the Next Level?
What makes this stock and its long term-potential interesting are management’s current steps, which suggest that there is a slowly emerging trend in outdoors equipment sales and what I’m seeing on YouTube.
Specifically, AOUT has just expanded and extended its lease for its Missouri corporate headquarters and distribution facility until 2038. To put this in perspective, the company has expanded its footprint in the space from 57% of the complex to 100% percent.
Moreover, the rationale for the move speaks volumes. It’s part of a plan to enhance operational efficiency, as the company expands its footprint to areas where outdoors enthusiasts live. Its most recent acquisitions are in Oregon, Texas, and Michigan.
The stock has traced an interesting trading pattern over the last several months which has been closely related to the general market’s trend. But it has moved nicely higher since bottoming out near $7.50 in August 2022.
The stock is currently consolidating its gains between $9 and $11. It could certainly pull back over the next few weeks if the stock market rolls over.
At the same time, however, money is trickling into the shares, as the Accumulation Distribution Indicator (ADI) and On Balance Volume (OBV) are very constructive. Even more interesting, according to recent reports, there has been a good deal of accumulation of the stock by insiders of late.
I’ve discovered what could be a long-term megatrend in investing, which seems to be under-appreciated by Wall Street . I stumbled on it by “wasting” time on YouTube. I’ve already discovered two great stocks which are fully capturing this trend in my premium service Profit Catalyst Alert. And I expect to be adding others.
More to the point, a company like American Outdoors is worth following, not just for its potential price appreciation, but as a bellwether which encompasses the general vibe of the sector. AOUT has scheduled its next earnings release on March 9, 2023, as this story is posted. I will be paying close attention to what management says about the current state of the business.
And although I’m not ruling out that I will consider buying this stock at some point, what management says will help me to see whether other stocks in the sector whose market cap and growth potential are more in line to my usual haunts.
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