(FORTUNE Magazine) – What we said

In "Surf's Up!" (June 28, 2004), we pondered whether it would be an endless summer for surfwear stocks. At the time, several surf brands were riding high even as the retail sector as a whole was treading water. We concluded that surf and skate retailer Pacific Sunwear would continue to grow, but might lose some style points with investors as it ran into tough year-over-year sales comparisons. And we deemed surfwear maker Quiksilver as the better long-term bet, thanks to its global reach and branding prowess.

What happened

The waves have been kind to both stocks. Since our article appeared, Pacific Sunwear (PSUN, $25) is up nearly 20%, while Quiksilver (ZQK, $28) has risen 22%. But both brands are off from 52-week highs they hit in early March. What gives? PSUN disappointed investors with March sales that came in below Wall Street estimates. Meanwhile, after topping out at over $35, Quiksilver fell sharply after investors balked at its deal to buy legendary French ski manufacturer Rossignol (which owns Cleveland Golf) for $320 million in cash and stock. But that didn't stop Quiksilver from shopping: In early April the Orange County, Calif., company purchased Surfection, a leading Australian retailer. The acquisition should bolster ZQK's position in the expanding Asian Pacific market. In May, Quiksilver will split its stock 2-for-1. -- Julie Schlosser