A Bridgewater Investments analyst says the boat business “remains a poor business to be in,” cautioning investors against betting on companies that aren’t diversified in their offerings or focused on global sales.
A shift in consumer preferences from new to used-boat purchases will continue, ultimately having a negative effect on the industry, wrote Bridgewater Investments analyst Marshall Hargrave.
“The economics of the boat industry are rather simple,” Hargrave wrote. “A lackluster economy leads to lower discretionary income, leading to low boat sales.”
Sterndrives have seen unit sales declines of 76 percent between 2004 and 2011, he wrote.
Marine Products, which builds the Chaparral and Robalo brands, is the No.1 manufacturer of sterndrive boats, Hargrave wrote. Chaparral moved into the top market share position in the 18- to 35-foot sterndrive segment.
At the end of 2011, Chaparral had an 8.37 percent share, putting it fourth behind Sea Ray (15.5 percent), Bayliner (12.8 percent) and Tahoe (11.5 percent), Hargrave wrote. At the end of June, Chaparral was the market share leader at 14 percent.
However, the company’s prospects for growing its top line or expanding margins is limited, he says.
Bridgewater Investments favors Brunswick Corp. stock over Marine Products because of its product diversity and its broader global focus; Marine Products gets 85 percent of its sales revenue from the United States, Hargrave wrote.