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Drew: A <I>WSJ</I> ‘Best on the Street’ Top Pick

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RV industry supplier Drew Industries Inc. figured prominently in The Wall Street Journal’s 14th annual “Best on the Street” awards, recognizing top business analysts.
In the “Leisure Goods & Services” category, one of 44 industries of particular interest to investors, a buy recommendation for Drew was the “notable pick” that earned national recognition for top analyst John Diffendal of BB&T Capital Markets.
This is what the WSJ had to say about Drew, parent to recreational vehicle and manufactured housing suppliers Kinro and Lippert Components Inc., and Diffendal, one of several individuals making names for themselves in 2005 by picking smaller companies’ stocks vs. the 30 large-cap names in the Dow Jones Industrial Average:
Ants crawled into the picnic for the leisure industry in 2005. Most notably: High gas prices took some fun out of seeing America by camper, and video on demand kept some movie buffs on their couches and out of theaters.
Still, a few analysts managed to find gems. “You had to dig deep,” says John Diffendal with BB&T Capital Markets Group in Nashville, Tenn., a unit of BB&T Corp., who won first place in this year’s Best on the Street rankings for the sector.
When the 51-year-old Mr. Diffendal saw inventory of recreational vehicles rising in early 2005, he searched for something a little different to add to his portfolio of staples like Winnebago Industries Inc.
He chose Drew Industries Inc., a maker of parts, such as doors, for campers that are towed behind cars. Mr. Diffendal figured that with gas prices high, people who wouldn’t buy a motorhome might buy a camper that could be towed. “They don’t have engines,” he notes. Also, Drew was introducing new products for motorhomes, including its “slideout” wall, which expands a camper’s interior. Slideouts have a “wow” factor, Mr. Diffendal says…
The stock returned 71% during the time he recommended it from late February to early November. He downgraded Drew to a “hold” in November after a run-up in the stock spurred by RV orders from the Federal Emergency Management Agency following Hurricane Katrina. The stock was “due for a rest,” he says, and he sidestepped an 11% decline for the remainder of the year.
Mr. Diffendal likes Winnebago for the next 12 months, although the shares slipped 15% last year, returning minus 9.2% during the periods when he rated the stock a “buy.” The company is a bellwether for an industry that he says is “still weak” from high gasoline prices but will be healthier as Baby Boomers retire. He upgraded the stock to “buy” from “hold” in November.

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