You and I drive 70% of economic activity in this country. We are consumers. If we lose our jobs or our confidence in the economy, we stop spending. Businesses make less money and pull back on production. They lay off workers, who spend less money, and the vicious cycle continues.

Some companies survive recessions and prosper in good economies because they make things we can’t do without, like toilet paper, soap and food. Other companies serve folks who have extra money to spend on special things, like hotels, jewelry and air travel.

[Read: 3 Reasons Why this Small Cap Could Return +200%]

There is, however, a further class of discretionary expense called the luxury item. If a company sells luxury items, then chances are it has been devastated in this recession and its stock has been destroyed.

#-ad_banner-#But if that company can survive the recession, bargain hunters may find a multi-bagger investment that others totally miss.

I found one such company that a lot of investors had written off, but has since rocketed +400% off its lows. But even after this fantastic run, I think it has another +400% left to run.

MarineMax, Inc. (NYSE: HZO) is a recreational boat dealer in the United States. It sells new and used recreational boats, including sport boats, sport cruisers, sport yachts and yachts; and fishing boats.

Raise your hand if you think this sounds like a luxury item company to you. Raise your other hand if you think the company is lucky to be alive.

Things have not only been bad for MarineMax since 2008, they’ve been downright apocalyptic. Revenue went from $1.25 billion in fiscal 2007 to $885 million in fiscal 2008 to a mere $588 million in fiscal 2009. The company generated a net income of $20 million in fiscal 2007, but then lost $134 million in 2008 and another $77 million in 2009.

For management, it must have seemed like nobody would ever sail again. Inventories stacked up and had to be written off by the hundreds of millions — from $550 million all the way down to $180 million.

The stock fell from a peak of about $36 in 2006 to a mere $1.22 per share in March of 2009.



MarineMax’s management leapt into action. First, it drastically cut expenses. It closed 37 of 93 stores. Selling, General & Administrative expenses used to be $60 million per quarter. That was cut in half.

The next step was to expand into some other arena of the boating business with high margins and lower costs. The natural solution was growing the service, parts, storage, brokerage and financing and insurance components of the business, all of which generate much higher margins than boat sales. This strategy worked so well that it allowed MarineMax to report its highest quarterly margin ever — a 30% gross margin compared to 21.5% in the prior year’s quarter, despite a -24% drop in revenue. This, combined with the expense reductions, pushed MarineMax into the black for the most recent quarter to the tune of a $512,000 profit.

The company also had to take a look at refinancing its credit facility. Now, any other company might have run into trouble with this part of the restructuring. However, the history and brand name of MarineMax served management well. The company now has a three-year facility with GE Capital to the tune of $100 million, with an option to increase to $150 million, for about 4.2% (based on current the LIBOR). The company is also now updating sales forecasts three times a year instead of annually, so as to better manage inventory.

The result of these pro-active steps has not been entirely lost on the market. The stock has climbed back up to about $6.50. But it isn’t too late to jump in on this comeback.

Action to Take —> Buy HZO. While more than 1,400 boat dealers have already failed, MarineMax has steadied itself on multiple fronts. As the company slowly regains market share and focuses on higher margin products, the stock could unquestionably return to its old highs around $30 a share in five to seven years, netting a +400% return.