Contents
This FFJ Portfolio - May 2025 report is a high-level recap of my activity during the month. Several buying opportunities presented themselves in April. May, however, was a very different story with the return of irrational exuberance.
Looking at the Financial Industry Regulatory Authority, Inc. (FINRA) monthly margin statistics, I suspect some investors experienced a margin call when the broad North American equity markets experienced turmoil in April! The May data is not yet available but I suspect that the debt balances will reflect an uptick from April.
The Return Of Irrational Exuberance
How is it possible that the the underlying fundamentals of Veeva (VEEV), HEICO (HEI and HEI-a), Microsoft (MSFT), Carrier Global (CARR), and Paycom (PAYC) justify a 13%+ increase in their respective share price in one month? At the other end of the spectrum, Becton Dickinson (BDX) and Copart (CPRT) experienced a 16%+ decline in their respective share price. Nothing about any of these companies justifies such wild share price swings in such a short time frame.
Share price behavior may be important to very short-term 'investors'. I do not, however, have the intestinal fortitude (nor the aptitude and desire) to try and predict short-term share price behavior. The less activity on my part, the better. This is why I focus on investing in high quality companies that have a strong probability of being able to weather challenging business conditions.
Nevertheless, I do look at what is happening with companies in which I would never remotely consider investing. Winnebago Industries, Inc. (WGO) is such a company.
Avoid Train Wrecks
WGO is, in my opinion, a good proxy of the state of consumers.
Purely from a Net Revenue perspective, WGO generated ~$4.958B, ~$3.491B, and ~$2.974B in FY2022 - FY2024 and ~$1.246B in the first half of FY2025.
Looking at the company's Consolidated Statement of Cash Flows in its Form 10-K and Form 10-Q (SEC Filings), we see a horrible trend.
In all fairness, the first 6 months of WGO's fiscal year (the beginning of September and the end of February) is a time frame in which not many people are likely looking to purchase boats or motor homes. Nevertheless, it is pathetic when:
- net income was $13.1 million and FCF was $19 million (without the exclusion of $8.1 million in shareholder based compensation) in the first half of FY2024; and
- net income was $13 million and FCF was $98.9 million (without the exclusion of $14.6 million in shareholder based compensation) for FY2024.
In the first half of FY2024, WGO generated ~$1.467B of Net Revenue meaning it generated Net Revenue of ~$1.507B (~$2.974B - ~$1.467B) in the second half of FY2024. On ~$1.507B of Net Revenue in the second half of FY2024, WGO added nothing to its bottom line and it generated less than $80 million in FCF!
Moody's is equally unimpressed. It downgraded WGO's long-term Corporate Family Rating from Ba3 to B1 (4 tiers below the lowest investment grade rating) on May 27, 2025.
S&P Global assigns a BB- rating (3 tiers below the lowest investment grade rating) with a stable outlook. I think a downgrade by S&P Global is in the cards.
WGO shareholders need to recognize that their investment is highly speculative.
WGO's performance should not be viewed in isolation to gauge the state of the overall economy but it is a 'red flag'. Other 'red flags' (rise in car repos, credit card delinquencies, mortgage defaults, loan delinquencies, an increasing percentage of monthly household income being allocated to the necessities in life (food/shelter), etc.), however, suggest all is not well.
WGO has several brands and the price points for their products are wide-ranging.
One of the most popular Winnebago models is the Class A motorhome. These luxurious vehicles are designed for long-term travel and can cost anywhere from several hundred thousand dollars to over $2 million depending on the motor homes features. The Class B motorhomes, also known as campervans, are smaller and more affordable. The price range is generally in the low 6 figures. The travel trailers (Micro Minnie) price range can be in the low 5 figures and the Minnie can be in the mid to high 5 figures (all prices are in USD and these prices are for new and not resale products).
In addition, to motor homes and campers, WGO's Chris-Craft brand caters to buyers looking for boats. Once again, there are various price points and depending on your preferences and budget, the price range can be in the mid to high 6 figures.
The cost of purchasing a WGO product is just the beginning as there are ongoing costs (ie. fuel, insurance, maintenance, etc.).
WGO also has to compete with the 'resale' market where the price points are typically much lower than for new products/models. Looking at RV Liquidators' website in Canada, we see used models priced well below new models.
Interestingly, at the time I compose this post on May 31, RV Liquidators reflects 14 NEW 2023 RVs, 138 NEW 2024 RVs, and 410 NEW 2025 RVs for sale. There are also 14 USED 2023 RVs, 16 USED 2024 RVs, and 10 USED 2025 RVs for sale. The 2026 models are already being sold yet there are still unsold 2023 models and this is the inventory for JUST 1 Canadian liquidator with 7 locations!
The über rich will continue to acquire 'luxury items' regardless of economic conditions and are probably inclined to travel by private jet and to own yachts.
A good percentage of WGO's customer base likely resorts to some component of financing. Since WGO's products are not 'essential', a component of WGO's potential customers will likely nix a purchase if their financial situation takes a sudden turn for the worse.
Whether you disagree or not with my assessment of WGO, I still suggest avoiding 'train wrecks'.
Recent Activity
Purchases
Market conditions in April provided me with the opportunity to deploy 'dry powder'. In May, however, I made no outright purchases in the FFJ Portfolio. I did, however, make the following purchases for a couple of young investors who are on their journey to financial freedom. Because these shares are not part of the FFJ Portfolio, I do not disclose how many shares were acquired.
Copart (CPRT)
- May 28 @ ~$52.15
Zoom Communications (ZM)
- May 27 @ ~$79.64
Sales
None.
Dividend Income
Dividend metrics are of little relevance in my investment decision making process. My interest lies in an investment's TOTAL potential investment return. In many cases, the preferred means by which a company can allocate its capital is to:
- reinvest in the business
- repurchase shares
- merger or acquisition
Nevertheless, I track dividend income and make this information accessible here.
Through the automatic reinvestment of dividend income, I increased my exposure to the following holdings held in the FFJ Portfolio.
- Apple (AAPL)
- Blackstone (BX)
- Carrier Global (CARR)
- Mastercard (MA)
- Paychex (PAYX)
- The Royal Bank of Canada (RY.to)
- West Pharmaceuticals (WST)
- Walmart (WMT)
The May dividend income was:
- 'Core' accounts: ~$ 882 CDN and ~$ 2,452 USD
- 'Side' accounts: ~$ 0 CDN and ~$ 763 USD
YTD2025 dividend income is:
- 'Core' accounts: ~$ 4,028 CDN and ~$ 22,326 USD
- 'Side' accounts: ~$ 319 CDN and ~$ 6,462 USD
Holdings
In prior FFJ Portfolio monthly posts I explain why the value of the 'Side' accounts component of the portfolio experienced a dramatic reduction in value in June 2024.
April 2024
Core Accounts: ~$ 739,787 CDN and ~$ 3,540,445 USD
Side Accounts: ~$ 606,667 CDN and ~$ 1,696,869 USD
Total: ~$ 1,346,454 CDN and ~$ 5,237,314 USD
May 2024
Core Accounts: ~$ 569,237 CDN and ~$ 3,642,078 USD
Side Accounts: ~$ 299,732 CDN and ~$ 1,784,750 USD
Total: ~$ 868,969 CDN and ~$ 5,426,828 USD
June 2024
Core Accounts: ~$ 553,777 CDN and ~$ 3,965,820 USD
Side Accounts: ~$ 0 CDN and ~$ 630,943 USD
Total: ~$ 553,777 CDN and ~$ 4,596,763 USD
July 2024
Core Accounts: ~$ 598,271 CDN and ~$ 4,218,120 USD
Side Accounts: ~$ 0 CDN and ~$ 881,679 USD
Total: ~$ 598,271 CDN and ~$ 5,099,799 USD
August 2024
Core Accounts: ~$ 598,631 CDN and ~$ 4,368,140 USD
Side Accounts: ~$ 27,470 CDN and ~$ 931,443 USD
Total: ~$ 626,101 CDN and ~$ 5,299,583 USD
September 2024
Core Accounts: ~$ 620,426 CDN and ~$ 4,428,345 USD
Side Accounts: ~$ 32,226 CDN and ~$ 953,814 USD
Total: ~$ 652,652 CDN and ~$ 5,382,159 USD
October 2024
Core Accounts: ~$ 617,739 CDN and ~$ 4,411,985 USD
Side Accounts: ~$ 37,230 CDN and ~$ 960,683 USD
Total: ~$ 654,969 CDN and ~$ 5,372,668 USD
November 2024
Core Accounts: ~$ 649,920 CDN and ~$ 4,786,925 USD
Side Accounts: ~$ 40,476 CDN and ~$ 1,026,183 USD
Total: ~$ 690,396 CDN and ~$ 5,813,108 USD
December 2024
Core Accounts: ~$ 628,504 CDN and ~$ 4,670,202 USD
Side Accounts: ~$ 39,292 CDN and ~$ 1,066,098 USD
Total: ~$ 667,796 CDN and ~$ 5,736,300 USD
January 2025
Core Accounts: ~$ 660,263 CDN and ~$ 4,950,735 USD
Side Accounts: ~$ 44,099 CDN and ~$ 1,126,663 USD
Total: ~$ 704,362 CDN and ~$ 6,077,398 USD
February 2025
Core Accounts: ~$ 653,051 CDN and ~$ 4,970,834 USD
Side Accounts: ~$ 41,447 CDN and ~$ 1,190,729 USD
Total: ~$ 694,498 CDN and ~$ 6,161,563 USD
March 2025
Core Accounts: ~$ 617,286 CDN and ~$ 4,829,134 USD
Side Accounts: ~$ 35,596 CDN and ~$ 1,265,103 USD
Total: ~$ 652,882 CDN and ~$ 6,094,237 USD
April 2025
Core Accounts: ~$ 620,799 CDN and ~$ 4,708,988 USD
Side Accounts: ~$ 74,619 CDN and ~$ 1,352,923 USD
Total: ~$ 695,418 CDN and ~$ 6,061,911 USD
May 2025
Core Accounts: ~$ 660,717 CDN and ~$ 4,863,614 USD
Side Accounts: ~$ 78,367 CDN and ~$ 1,402,636 USD
Total: ~$ 739,084 CDN and ~$ 6,266,250 USD
NOTE: The above values exclude investments in several tax-efficient accounts for which I do not disclose details.
Final Thoughts
I wish you much success on your journey to financial freedom.
Note: Please send any feedback, corrections, or questions to [email protected].
Disclaimer: I do not know your circumstances and am not providing individualized advice or recommendations. I encourage you to make all investment decisions through research and due diligence. You should also consult your financial advisor where appropriate.
I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.
