We hoped accelerating losses as the stock market slides would lead to a bulge of insiders buying their stocks on sale. That didn’t happen. A wave of corporate executives investing could be seen as a sign that the current selloff is temporary. As an example, insiders went heavy in the bullish camp during the COVID crash. It wasn’t long afterwards the markets reversed course and headed higher.
Hopefully, the lack of buying isn’t a sign that executives see the economy heading in the wrong direction. We’ve seen several outlets starting to use the “R” word: a recession sometime in 2022. Let’s hope not.
While stocks retreat, we remember the axiom, “never try to catch a falling knife.” It means wait for prices to stop falling before buying. With that in mind, investors might think about cataloging ideas in this newsletter (and others) as possible buy candidates when the selling stops.
As we mentioned up top, the number of insider buys was on the skinny side last week. Thor Industries, Inc. (THO) was the only company on last week’s roster of purchases that made our catalog. Co-Founder, Chairman Emeritus and Director Peter Busch Orthwein bought 10,000 shares of THO at $98.54 for a little less than $1 million. It was the director’s second big buy in as many months. In early December, he acquired another 10,000 shares at $103.41. A little north of $1 million. Combined, the two transactions top $2 million. (1)
It’s interesting to note that the Co-founder has sold more than $18 million of Thor in the past 20 years versus $2 million in purchases. Perhaps his newfound enthusiasm is the product of new products.
Thor Industries is the world’s largest manufacturer of recreational vehicles. The RV leader recently introduced a pair of electric RVs during the 2022 Florida RV SuperShow. (2) Maybe the new additions to Thor’s RV roster can reverse next the expectation of falling sales and profits in 2023. Analysts forecast earning per share (EPS) of $13.46 and sales of $14.72 billion in 2023 compared to consensus EPS expectations of $14.86 and $15.14 billion in revenue this year. Normally, falling sales and profits are a prescription for a falling stock price.
THO has been in reverse since October, setting its 52-week low of $85.12 on Friday, January 21, 2022. The RV-maker’s stock has been as high as $152.20 in the past year and Wall Street has a consensus one-year price target of $144.29. The company also pays a dividend of $1.72 (1.97%).
Now, much like the overall market, it might be wise to wait for the THO knife to stop falling before jumping in. New lows tend to be followed by new, lower lows. Our strategy would be to wait for Thor to begin a new uptrend before taking a position.
We define a reversal as a rally, followed by another round of selling that stops before the previous low mark, and then another swing higher that extends beyond the previous rally.
This illustration is an example. The first green line is the initial rally after the fall. The second red line doesn’t drop as low as the fist red line i.e., selling stops before the previous low. The second green line goes beyond the first green line. The second green line marks a potential reversal once it bypasses and closes higher than first green line.
Overall: Thor Industries, Inc. (THO) should be added to your catalog of potential buy candidates once the knife stops falling. Based on Wall Street’s price expectation, the RV maker offers attractive upside plus a dividend of close to 2%.
The introduction of electric RVs for the number one manufacturer should act as a catalyst for the stock once the selling stops.
1 – https://www.secform4.com/insider-trading/1255017.htm
2 – https://ir.thorindustries.com/investor-resources/press-releases/press-release-details/2022/THOR-INDUSTRIES-DEBUTS-TWO-ELECTRIC-RV-CONCEPTS-AND-UNVEILS-FIRST-PHASE-OF-EMOBILITY-STRATEGY/default.aspx