It’s hard to figure out exactly what’s going on with the broader economy. On one hand, the benchmark S&P 500 is up nearly 6% year-to-date, hitting another all-time high. On the other, bellwether stocks like JPMorgan Chase & Co. (NYSE:JPM) have barely moved since ringing in the new year — JPM is actually down 2% on the year after a rough Wednesday. But one sector that’s making waves literally and figuratively is boating stocks.
That news is a little hard to digest given the retail market volatility. Shares of luxury brand names like Nordstrom, Inc. (NYSE:JWN) or Williams-Sonoma, Inc. (NYSE:WSM) have looked awful recently. And it’s common knowledge that boats are money pits. Nevertheless, the data is clear — the affluent are seeking the open waters, and boating stocks are looking to capitalize.
According to the U.S. Federal Reserve, the industrial production index for boat building jumped 7.6% in the first quarter. This is the biggest such gain since 2014, when the index increased 8.7% in the first three months. The rise in sentiment brought the industry benchmark above its five-year trailing average. The rally among manufacturers also reversed a dangerously bearish trend. Since July of last year, the index skyrocketed nearly 19%.
Boating stocks are also experiencing benefits in other areas of the supply chain. For example, employment trends in the sector appear to have stabilized following a decline throughout most of last year. The bearishness in boat dealership demand has also flat-lined in 2017. Whatever it is that President Trump is saying or doing, the affluent are responding positively.
Admittedly, this highbrow market isn’t exactly an investment that rolls off most analysts’ tongues. But based on shifting sentiments, the vast oceans could represent the next big opportunity. Here are three boating stocks you haven’t thought about buying, but should!
Boating Stocks to Buy: Brunswick Corporation (BC)
Among boating stocks, Brunswick Corporation (NYSE:BC) is the king of the jungle. BC operates four divisions — marine boats, boat engines, fitness equipment and billiard tables. Within the marine boat division, the company offers everything from motor yachts to recreation vehicles to pontoons. This wide spectrum in product lines helps BC capture more market share from the younger, Millennial crowd.
On the financial side, one of BC stock’s standout attributes is its revenue per share growth. Since 2010, the sales per share growth rate averages 4.4%. This has significantly picked up steam last year, when revenue per share jumped to 12% over the past five quarters. Over the trailing three years, Brunswick’s nominal sales growth was higher than two-thirds of the global leisure industry.
In the markets, it’s very clear that the boat-maker’s core consumer base was overjoyed with Trump’s victory. One day after the general election, BC stock gained nearly 2.5%. On November 10, shares jumped more than 6% on the session. Currently, Brunswick is consolidating these earlier swings, which makes perfect sense. Over the past six months, BC has profited over 14%.
Once shares catch their breath, watch out! Boating stocks are heading into their peak season, which implies further upside for BC.
Boating Stocks to Buy: Marine Products (MPX)Marine Products Corp. (NYSE:MPX) is one of the most recognizable names among boating stocks, thanks to its two leading brands, Robalo and Chaparral. The Robalo division specializes in sport fishing boats, while Chaparral is best known for its Signature Cruisers and Vortex Jet Boats.
According to the MPX website, Marine Products is the “top manufacturer of 18- to 35-foot sterndrive powerboats” in the U.S.
The accolades that MPX has received are certainly not unwarranted. A quick glance at their financials reveals one of the most stable and secure companies available for trading. Marine Products’ profitability margins are ranked in the top third of the recreational vehicles industry. Both its trailing three-year revenue and EBITDA growth rates are well above the competition. Furthermore, the MPX balance sheet is a thing of beauty, highlighted by a zero debt liability.
Not surprisingly, MPX stock has made some serious moves. Between the beginning of last November until 2016 end, shares almost went vertical, exploding to a nearly 46% return. A good chunk of that speculation was consolidated: MPX ended up losing 20% from the start of 2017 until mid-March. Still, shares are on the move again, with the boat manufacturer gaining 17% in the past month.
Given the bullishness among boating stocks, and Marine Products’ excellent financials, I like my chances with MPX stock.
Boating Stocks to Buy: West Marine (WMAR)
With the cheapest yacht or motorized boat costing at least five-figures, the aforementioned boating stocks are not for the parsimonious. In other words, if you have to ask, you can’t afford it. But enjoying the open waters isn’t just limited to the super wealthy. By ditching the engine, and replacing it with good ole human strength, anybody can access water sports. This is where West Marine, Inc. (NASDAQ:WMAR) really shines.
WMAR offers a number of kayaks, paddleboards and canoes, with a variety of price points to fit any budget. West Marine also sells inflatable speed boats as a considerably cheaper alternative to the non-inflatable version. In fact, WMAR is a one-stop shop for every conceivable water sport need, from engine parts to GPS navigation units.
The financials have a lot of strengths, especially in the balance sheet. Like Marine Products Corp., WMAR doesn’t have to deal with long-term debt. However, where it lacks is in the sales arena. Revenue growth has been flat over the past year, and this has negatively impacted WMAR stock.
However, personal consumption expenditures for recreational goods and vehicles have shot up over 24% in the past five years. Boating stocks in particular have benefited since President Donald Trump’s White House victory. Thus, WMAR could turn out to be a very smart speculative play.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.