Brunswick: A Forgotten Recreational Vehicle Stock Coming Out from Underwater

Brunswick (BC) May $5 call volume is soaring with shares at $4.80 on a 9% move higher, with 3,300+ calls trading against a prior open interest of just 133. Implied volatility is down from recent highs, but is still elevated at 166%. Shares are breaking out of a consolidation area and look to target January highs near $6. Earnings are scheduled for April 30, and shares trade at just 1.2X cash value and have 10.3% of the float short after making a textbook double bottom at $2.

The story is even a better one as we have seen recreational vehicle companies such as Harley (HOG), Polaris (PII), Thor Industries (THO), and Winnebago (WGO) more than double this year alone as the once-thought-of depression begins to look more like a recession, and consumer spending will return much sooner than originally expected.

Brunswick is lost in the shadows of these companies because it is mainly classified as a diversified machinery company. Many forget that it is a major player in Boating, under the Hatteras, Cabo, SeaRay, Boston Whaler, and a variety of other names. Boating is the ultimate recreational sport, and with the summer approaching there is a good chance that things could turn brighter for shares of the company that have fallen from $15 in October to under $5.

The company obviously has some issue to work out, but at a 47% discount to book value and the demand picture looking better for its business segments, there are reasons to believe that shares will head higher from here; option traders agree, and are putting money to work.

Disclosure: No Holdings in Bruswick

Comments

[clm2112:]

Brunswick has a long hard road ahead of it. While the boating industry is in the toilet, and boat owners are abandoning craft on the waterways, Brunswick still has a huge advantage: The Mercury/MerCruiser parts business. When times get better, there will be a lot of boats in need of parts. Plus, their other recreational lines (Bowling and Billiards) do ok in a recession. If Brunswick can survive 2009, it should do better in 2010.

Positions: no BC currently, have owned in the past, will own again in the future ;-)

Apr 30 05:53 PM

[Joe Kunkle:]

Nice 60% climb in 2 weeks!

May 18 07:55 AM