This column was originally published on RealMoney on March 3 at 8:10 a.m. EST. It's being republished as a bonus for readers.

As hard as the naysayers try to marshal evidence to support their gloomy outlook on the consumer, shoppers continue to prove them wrong.

February sales data released by many retailers Thursday were weak, but the broader consumption data for January, including spending on services, are convincing. Personal spending surged 0.9% -- the biggest advance in six months.

Consumers also recently delivered another poke in the eye to the naysayers who have forecast a slowdown based on misperceptions about the savings rate and concerns about fuel costs. Consumer have been spending more than ever on something as frivolous as having fun, when the gloomy Gus crowd expected them to stay home wringing their hands about wobbly home values and the price of gas.

In January, consumer spending on fun -- dining out, recreational services and hotels -- was up 7.1% compared to the same month a year ago, according to the latest government data. Consumers spent close to $1 trillion on fun-related services last year, a record 10.2% of their disposable incomes, Oak Associates economist Ed Yardeni points out.

What's a good way to play this robust spending on fun?

One approach might be to go with a beaten-down name trading close to book value -- but one with a plan that suggests investors could see 50% upside or more in a year or so.

I believe that's what you have with Great Wolf Resorts ( WOLF), a Wisconsin-based company that operates vacation hotels with indoor water parks.

Great Wolf is a prime example of a busted IPO -- an initial public offering that sinks well below its opening bid.

The company went public 15 months ago and performed reasonably well for two quarters. But last July, Great Wolf infuriated investors when it missed second-quarter numbers in a big way. What rankled was that management had offered no hint of trouble during a roadshow just a few days before the quarter's close.

Within months, the stock slipped to $8 from $22. Recently, Great Wolf has risen to $10. This is well below its book value of $13 a share, and just above the $9 in tangible value investors could reap if the company broke up and sold its assets, estimates Jefferies & Co. analyst Samir Jain.

However, Great Wolf has an expansion plan that could increase 2007 cash flow 64% over this year's estimates to $47 million, Jain said. The expansion plan could push the stock up into the high teens inside a year, according to one money manager who owns the stock.

Why should anyone trust management to pull off such a feat? That's a good question following last summer's meltdown.

"It created a confidence issue with the company," concedes Chief Executive John Emery. "We are working our way out of it." The company has beefed up internal controls and delivered two quarters without nasty surprises.

But investors are still cautious. "It's not so much that we can't trust them now. I would say that we just look at everything twice," says Damon Andres, a portfolio manager at the Delaware REIT Fund (DPREX), which held the stock when it blew up. He's traded around the name since and still holds a position.

Perhaps Great Wolf's biggest problem is that potential investors still focus on the credibility issue when they really should be looking at its aggressive growth plan, which Andres believes could add $7 or $8 to the stock in a year or so.

Last year, Great Wolf shed exposure to the Midwest, where economic problems dragged down results. It also opened two parks, in Pennsylvania's Pocono Mountains and Williamsburg, Va., that give a hint of things to come.

Its strategy is to pick locations near cities and tourist attractions and build bigger parks with more rides and amenities like spas and shops that tease more money out visitors' wallets.

Families at the two new resorts spend anywhere from $50 to $100 more a day than the $300 average at its older resorts. "Every time we take our experience up another notch, the consumers are right there with us," says Emery.

If the trend continues, Great Wolf's revenue and cash flow could rise nicely as it adds more parks. This spring, Great Wolf will open a big park in Ontario near Niagara Falls. Another is scheduled to open in the fall in Mason, Ohio, near a popular theme park called Paramount's Kings Island that draws 3.5 million visitors a year.

If those parks replicate the higher spending at the Pennsylvania and Williamsburg resorts, Great Wolf shares could move into the high teens by the end of the year, Andres says. "They have proven that they can get into great markets and that is their strategy," says Andres. In the meantime, he doesn't rule out a buyout in the $15 a share range.

Late next year, Great Wolf plans to open a water park and resort in Grapevine, Texas, near the Gaylord Texan Resort and Convention Center, 20 miles from Dallas. It also has another planned for Chehalis, Wash., near the Chehalis Indian reservation.

After 2007, the company will add one or two parks a year. Jain, the Jefferies analyst, calculates each park could add $1 to $2 per share. "I think that is what is getting lost in the shuffle, because there is such negative sentiment towards this company. All people see is a broken IPO," he says.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Great Wolf Resorts to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Brush is an award-winning New York-based financial writer. At the time of publication, Brush had no positions in any of the securities mentioned in this column, although positions may change at any time. In addition to writing for RealMoney, Brush has a weekly market column on MSN Money called Company Focus, and a column called Insiders Corner at He has covered business and investing for The New York Times, Money magazine and the Economist Group. He studied at Columbia Business School in the Knight-Bagehot Fellowship program and the Johns Hopkins School of Advanced International Studies. He is the author of Lessons From the Front Line, a book that offers insights on investing and the markets based on the experiences of professional money managers.

Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.

Brush appreciates your feedback; click here to send him an email.

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