What will Buffett Munch on Next?
Apparently, the RV industry has been all a twitter in the past few weeks with speculation that financial tycoon Warren Buffett has his eyes on buying an additional RV manufacturer for his portfolio. Worth an estimated $46 billion, he could gobble up on the entire $12 billion RV industry and still have money left for a weekend in Vegas. But industry speculation seems to be focused on three companies. Gulf Stream is on top of the list for many people — except the Gulf Stream staff. With Buffett already heavily invested in the manufactured housing industry, he’d have a natural connection to both industries through Gulf Stream’s Fairmont Homes division. Gulf Stream is a solid company with innovative product lines that cross multiple markets. And, as a family-owned business, they could be evaluated under the public scrutiny of stockholders and other investors. Coachmen has also been mentioned as a possible item on Warren’s buffet. A full-line manufacturer, Coachmen has been struggling lately for some reason to the point that CEO Claire Skinner abruptly announced her resignation this summer. Coachmen would fit the Buffett’s investment strategies nicely.
According to the online encyclopedia Wikipedia, Buffett looks for companies that:
- Are undervalued but possess a margin of safety that meets expected return-to-risk characteristics. Coachmen has been flying under the radar, but still offers a promising product line.
- Where company events are not related to market changes like mergers, acquisitions and liquidations. In the past year or so, Coachmen has become lean and mean, shedding off other companies that don’t contribute to its core production.
So Coachmen would be a nice fit, as would Fleetwood. Another struggling company over the years, Fleetwood has sound fundamentals once again, but is lead by a president called out of retirement. While Buffet prides himself on not interfering with the companies he controls, he does insist on having sole decision-making authority over the top executive and the CEO’s compensation. Buying Fleetwood would another good fit for Buffet who could install his own minion to oversee day-to-day operations and motivate a highly-talented existing group of managers to reach new heights. Perhaps the coup d’etat for Buffet would be the purchase of Thor. Buying the industry’s largest “manufacturer” (Thor actually owns manufacturing companies) would be a spectacular way for Buffett to say “Hello, let’s play” and raise the stakes to the rest of the industry. The acquisition would give him a sizeable foundation upon which to swing the entire industry — and the purchase would be immense enough to send shockwaves through Wall Street, thus attracting even more capital to the industry.
Unlike my Friday the 13th Doomsday scenario, this Halloween idea may pack far more treat than trick for the RV industry. What do you think? ____________________
Readers have two choices in replying. They can reply to the blog directly or engage in an interactive discussion with others on the RV Trade Digest forum page, located here.
November 2nd, 2006 at 10:13 am
NATIONAL RV needs a buyer or they’ll become extinct. It’ll have to be Warren Buffet or Thor!
November 1st, 2006 at 10:39 am
If you want to go with some alphabetical logic, start with “A” for Alfa Leisure. Alfa really needs the kinks jerked out. The company has a good concept, but not the leadership or engineering qualities to follow thru.
October 31st, 2006 at 5:54 pm
I think that WB interest in the RV business is a strong positive. This industry needs to have fresh ideas on both sides of the aisle. The programs that R66 is adding to the dealers is just one great example of how much can be done with some thought to our future growth, and not just talking about the present day problems. These problems are important but should have been addressed long ago and then we now would be ahead of the stalled gap between the RVIA and the RVDA body. Lets hope he we will bring a great amount of thoughts to both sides. Lets hope that the thought by Mike Ingram will fall on death ears that wuld be a major down turn for our future.
October 31st, 2006 at 5:39 pm
This is all Dollars and very little Sense. Considering the RV industries archaic methodology of maintaining life long customers. The manufacturers generally are only concerned with the selling of the major units. The RV consumer is a very knowledgable and educated consumer that is very tech savvy and service expectation oriented that will become the demise of the majority of manufacturers whoever is the principal owner managing or investing in this industry.
October 31st, 2006 at 5:21 pm
It is certainly true that Mr. B has the financial resources to become a “swinger” in the RV manufacturing business. Yet, I see a big difference between linking Mr. B’s investment in GS’s Fairmount Homes and an RV Manufacturer.
Reasons:
1. Manufactured homes are permanent structures that attract a portion of the population to that lifestyle. These folks are generally easy to please once their home is set up and operating properly. They tend to stay put and not move very frequently.
2. RVers, on the other hand, demand and rightfully expect, that their investment in a new MH or towable, be the best that they can afford. A manufacturer who does not hear this message will soon find out that their Service Bay is full, or that their warranty expenses are going out the roof. On this point, I doubt that Mr. B can fix that problem unless he decides to take a very active involvement in listening to what the RV Community really expects.
I agree with a previous writer, the RV Product is an entity until itself.
October 31st, 2006 at 5:09 pm
After beginning my retail career in the mobile home business and ending up(Thankfully) an RV dealer, I have followed the Clayton Homes purchase and then the Forest River purchase by Buffet. Buffet is brilliant in his acquisitons, if people doubt him, it’s because of their unfamiliarity with Buffet’s ability to make strategic acquisitions and then expand them. I wholeheartedly believe Buffet will acquire the likes of Fleetwood and blend the mobile home business into the Clayton organization and the motorhome business into the Forest River group. Then, the ability to duplicate the build-finance-insure model of the Clayton powerhouse in the RV business would dominate the RV industry. Anyone who thinks this is not possible then they are just not familiar with who’s involved.
October 31st, 2006 at 3:40 pm
How about some alphabet logic? FRL! Forest River - Liegl. Freedom Roads - Lemonis. That would spark some lively conversation.
October 31st, 2006 at 8:06 am
YES-Warren B. DID buy Forest River. EST purchase price via Elkhart “street talk” was $800 Million. (Hard to believe!) In my 30+years as an OEM RV Rep. I have seen many “outside” companies come into the industry to “buy” and “fail”. (Harley Davidson IE: Holiday Rambler)for example. They just do not get the idea of what the industry is all about. And they do not understand how the sales Cycle relates to the heart beat of the retail customer. I doubt that Mr. Buffet is any different.
October 30th, 2006 at 5:44 pm
Indeed he did, and buying one of these other companies would certainly be another feather in that cap! - Editor
October 30th, 2006 at 4:32 pm
Didn’t Buffett already buy Forest River?