With regard to the main factors of cyclical growth, BRP (TSX: DOO) (NASDAQ: DOOO) has been an investment of choice for many Canadians. Indeed, this manufacturer of recreational sports equipment has jumped following the pandemic. Since the pandemic lows, this leading cyclical action has been better than a five-bagger for investors.
Of course, cyclical stocks carry a higher risk. That said, in a hyper-bull market like the one we seem to be in, these stocks are outperforming. Companies like BRP continue to offer an impressive upside to aggressive investors optimistic about the future.
Having said that, being a defensive investor myself, these levels may be unsustainable. Let’s take a look at what could drive this stock up and what some of the risks might be.
BRP has a proven track record of innovation in the powersports industry
Since last year, BRP has lost market share in the crucial off-road vehicle market. This factor worried some investors as it appears that this sector is over-indexing nascent buyers with high lifetime values. That said, the Valcourt company managed to increase its market share in the second quarter of this year. Indeed, the potential for BRP to continue to achieve high lifetime value for its customers could be significant in the future.
Of course, a lot of it depends on the state of the economy in a year or two. Additionally, BRP consumers will want to see continued innovation across the company’s product mix.
In this regard, BRP has excelled.
Recently, the company revealed that it will introduce the Maverick X3, the very first side-by-side vehicle that can produce over 200 hp. Further product upgrades and new versions are expected in the coming quarters. For motorsport enthusiasts, this is a very good thing.
For investors in this cyclical stock, growing market share and the potential for higher earnings over time is a key reason to stick with this growth game.
At the end of the line
As mentioned, the quality of BRP earnings remains the key issue for investors. It remains to be seen whether these are sustainable if the economy takes a hit.
However, this cyclical title seems to be well placed to continue its momentum. Of course, investors considering BRP at these levels should be careful not to dive too quickly. There might be better buying opportunities ahead. However, those who are optimistic about the economic outlook for the quarters and years to come may want to put the average dollar costs into one position. Such a strategy has proven successful for those who buy the weakness predicted by 2020.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .
Foolish contributor Chris MacDonald has no position on the stocks mentioned.