Wade Slowly Into West Marine Waters

It may sound like an odd time to buy a boating products retailer.  After all, consumers are pulling back on spending and recreational sail and power boats floating money pits are an easy place to cut expenses.

Don’t tell that to Randolph Repass, founder of West Marine (WMAR).  He has his full bull on, and is buying shares hand over fist.  After recent purchases pursuant to a Rule 10b5-1 buying plan, he now owns almost 1/3 of the company.

Maybe Repass sees the tough economy shaking out competitors, or maybe he believes that recent cost containment measures will offset declining revenues.  Or perhaps he is just trying to protect his legacy.  The truth is, nobody knows.

Regardless of Mr. Repass’s motives, investors would be wise to wade slowly into West Marine waters.  After a long term decline, the stock spiked and is now overbought and apparently stalling, just as it nears resistance.  As Tim Sykes often points out, this pattern is usually a sucker's bet on the long side.  Could be an interesting short though, with a tight stop.

Click to enlarge

DISCLOSURE: No position

Comments

[sportsguy:]

I had been short this stock for awhile. Tthe trade off for power boat users is expensive use with high fuel versus long overdue maintenance. I drove to Key West several weekends ago and the numbers of boats visibly operating versus sitting idle was staggering. I would cover at the low prices, and expect a management buyout at some point.

2008 Sep 10 10:40 AM

[sportsguy:]

should read sitting idle versus visibly operating, sampling both Key West waters and Cape Cod waters in August

2008 Sep 10 10:46 AM