These off-road companies will power through bumpy markets

The powersports industry is expected to benefit from growing demand.

Vikram Barhat 19 April, 2016 | 5:00PM

Investors with some risk tolerance looking to bulk up their exposure to the consumer discretionary sector may find a few attractive opportunities in the powersports industry. It appears to be a good time to look at some off-the-beaten-track companies whose products are growing in demand due to geographic expansion and rising discretionary spending. These leisure firms make off-road and recreational vehicles -- snowmobiles, all-terrain vehicles (ATVs), utility task vehicles and personal watercraft -- for commercial and consumer markets and offer attractive margins of safety for long-term investors.

While these companies are under duress from weaker demand in key oil-producing regions, these headwinds are temporary, said a Morningstar report, noting that the North American powersports manufacturers are well positioned to maintain share and improve margins given their sustainable competitive advantage, brand equity and brand loyalty that will continue to fuel sales growth.

Last year's statistics further support this positive outlook. Global snowmobile sales were around 150,000 units (up 6% annually over the past five years), side-by-side vehicle sales were approximately 415,000 units (up 12%), and personal watercraft sales were roughly 83,000 units (up 3%), according to Powersports Business, a market data publication for the powersports industry.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
BRP Inc50.71 CAD2.05
Polaris Industries Inc90.89 USD5.55

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a freelance writer.