Marine Products Hard to Sink

Investors in boat maker Marine Products (NYSE: MPX  ) breathed a sigh of relief last week as the company's shares -- first sinking under the weight of yet another disappointing quarter -- cast off some of their ballast and regained half of their initial losses. Sunk more than 5% in the wake of its announced 1.6% decline in sales and 37.2% profits collapse, the shares have since bobbed back up to hold at just a 2.5% loss. But are investors just rearranging shares on the Titanic? Let's find out.

Subscribers to Motley Fool Hidden Gems will already be familiar with this story. As we do with all of our official recommendations (and even a few unofficial ones), our intrepid staff of analysts updated our members immediately on the details of Marine Products' barnacle-clad quarter in the Oct. 25 edition of Hidden Gems Daily. For those who are not yet members (you can remedy the situation by clicking here), the highlights go as follows:

• Profits per share for the quarter came in at just $0.12, which was down a third from last year's $0.18.
• Unit sales of boats were down 12.5% fewer boats year over year.
• But in a continuation of previous trends, Marine Products saw the average selling price of the boats it did manage to sell rise 11.6%. So it seems that affluent boat buyers are still spending plenty. Mariners of more modest means, however, are staying close to port.

What does all this mean to investors? Fool analyst Bill Barker, writing in Hidden Gems Daily, suggests that, for one thing, we should stop thinking about Marine Products as a "growth story" and start looking at it as a potential turnaround. And what exactly will it take to turn this ship around? In my rundown of last quarter's conference calls from Marine Products, Brunswick (NYSE: BC  ) , MarineMax (NYSE: HZO  ) , and West Marine (Nasdaq: WMAR  ) , I highlighted several possible catalysts cited by Marine Products CEO Rick Hubbell, among them:

• Declining boat prices
• Declining insurance costs
• Better consumer sentiment
• And last, but not least: "a nice turn in the economy."

While we wait for those hypotheticals to materialize, though, investors can take comfort in one fact: Judging from the continued rise in average selling prices, Hubbell has proven his grasp of the business. Last quarter, he rejected analyst suggestions that every boat cycle sees small boat sales decline first, then larger, then the nadir of the cycle, and only then a recovery. Said Hubbell: "We don't really subscribe to the idea that the high-end seems to soften after the smaller boats.... We think the high-end market is going to continue [to grow.]"

And grow it did.

What else did Hubbell and his peer CEOs have to say? Find out in: "Boat Makers See Shoals."

For more ideas on great small caps like Marine Products, take a 30-day free trial of Hidden Gems.

Fool contributor Rich Smith does not own shares of any company named above.