Luxury stocks have been all the rage so far in nascent 2013. High-profile retail brands such as Tiffany (NYSE:TIF) and Michael Kors (NYSE:KORS) have been on fire of late, with TIF shares spiking nearly 10% since Jan. 1 while KORS has seen a near-23% surge. The gains in these luxury brands are impressive, but they don’t hold water when compared to a real luxury brand such as recreational boat maker and retailer MarineMax (NYSE:HZO). The stock has been riding a tsunami-sized wave of buying, and since the beginning of the year HZO has vaulted some 43%.
The latest gains in HZO began in late-November 2012, a couple of weeks after the boat retailer delivered a narrower-than-anticipated fiscal fourth quarter loss. Revenue in fiscal Q4 was a strong $137.3 million, well ahead of consensus estimates for $126 million. Three months later the company also bested estimates for fiscal Q1 by reporting a net loss of $4.16 million, or a loss of 18 cents per share. Consensus forecasts pegged the EPS loss at 21 cents. Revenue in Q1 also bested estimates, but perhaps more importantly the company saw same-store sales grow more than 8% compared to a 2% increase in the same period a year ago.
Click to EnlargeThe sales gains confirm that luxury buyers are back after several years of worrying about the economy and the future of tax policy. The well-heeled consumer capable of buying a $500,000 recreational toy is doing just that, and that is the market that MarineMax caters to. Indeed, the company’s SeaRay 370 Venture, with its price tag of $550,000, was just named Boating Magazine’s 2013 Boat of the Year.
I suspect that the extra publicity from the Boating Magazine award will help draw high-end buyers to the showrooms just in time to get geared up for boating season. I also expect the luxury trade in stocks like HZO to draw more risk capital over the next several months. As such, HZO shares represent a momentum luxury trade that I think you can ride about 15-20% higher over the next three months. My price target for the stock is $16 by mid-April.
As always, to prevent your trade from capsizing, make sure you place a stop-loss order in at about 8% below your buy order.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.