Smith & Wesson: Great for Personal and Portfolio Protection

There is always a bull market going on somewhere and today’s feature could offer more than Wall Street’s punk returns as of lately. Smith & Wesson (SWHC) has appeared on Hillbent’s 5-day new high radar for the last 2 trading sessions, including Monday, despite the market’s recent sell-off. SWHC closed up +8.13% on volume 315% greater than its average daily volume.

Many are familiar with Smith & Wesson as it has been around for at least 150 years and is one of the world’s leading manufacturers of high quality handguns, law enforcement products, firearm safety and security products. As manufacturing goes, this is one industry (defense products & services) that America will never give up or outsource, so expect the company to be around a while longer. Trust me on this one folks. Otherwise, just scratch your head and think about for it a minute or two and I am confident that you will reach agreement with me.

Fundamentally, the company is sound and earns Hillbent’s proprietary composite grade of "A". Over the past 5 years, the company has grown its sales and earnings at respective growth rates of 17% and 15%. Zacks estimates show that the company will grow EPS at +160% for 1Q 2009 and -32.95% for FY 2009 and 96.+71% FY 2010. Going forward, Reuters News reports that the company plans to double its revenue over the next 3-5 years by entering the rifle and long gun markets and via acquisitions that are projected to add $100mm to the top line.

This one is worth further investigation for investors seeking both personal and portfolio protection in a company that seems quite capable of dodging bullets in the investment war, better known as the subprime credit bear market. For any short sellers, listen up: "Do you feel lucky, punk? Go ahead… make my day…"

Disclosure: None

Comments

[WhereAreThe...:]

Sorry, but this stock has negative earnings. How the hell does it get a composite grade of "A" ? -WhereAreTheCustomersY...

Feb 24 08:31 AM

[je:]

Where Are The Customers Yachts:

That is a bullish chart the way he has it drawn and you could probably make a case for a bear flag formation as well. The answer lies in thebreak out.

The fundamenals are that there is demand for guns -mine are already bought.

This was in my reading this morning and although the wheels of Washington run slow, gun control has been an ongoing effort:

Gun Control on the Way? Someone sent me an email on a bill called HR 45 Blair Holt Firearm Licensing & Record of Sales Act of 2009. Always skeptical about emailed information of this sort, I had a researcher give it a look and, sorry to say, it’s real. The bottom line is that Congress is taking up a bill that will require gun purchasers to jump through a number of hoops before being able to buy a gun, including pass a test and agree to allowing government officials to come to your house to inspect your guns at will. Failure to properly secure your guns will carry a fine and even the potential for a five-year stint in jail. You can read more about the legislation here. www.opencongress.org/b....
Knowing as I do the attitude of a number of gun-owning acquaintances of mine, I think legislation such as this could trigger some pretty strident opposition. And for good reasons: one of history’s better-documented lessons is that almost every transition to dictatorship has been preceded by some form of gun control.

Feb 24 08:50 AM

[Roger Knights:]

Thanks for the clarification, ARF.

Feb 24 10:37 AM

[User 340306:]

"... double its revenue over the next 3-5 years by entering the rifle and long gun markets.."

Um well, they already DID enter the long gun market almost two years ago and the failure of their new offering, the i-Bolt rifle, is one reason the stock is down where it is. They ran up large costs in the development and initial production of those rifles, and then found only lukewarm sales at best. Not only that, but the ones that WERE sold are currently subject to a safety recall, so the bleeding from that hasn't yet stopped.

Like all other makers of AR type rifles, they are currently selling just about every one of those they can make. Hot demand has allowed selling prices for these to rise quite a bit since last summer. At some point, everyone who wants an AR type rifle - and is scared that the B.O. administration is going to outlaw them - will have purchased and sales will slow. (Or they will be banned and sales will plummet.)

Their M&P pistol line is also selling well and is a great product. There was, however, a large inventory glut of those last year. The recent administration change (along with rebates which have since run out) has caused sales of these firearms to greatly increase (along with the AR type rifles mentioned above) and perhaps most of the overhanging inventory has been cleared. Retail prices for these pistols have also increased quite a bit in the past few months.

The have recently introduced a number of new revolvers and brought back several old "classic" revolvers. There seems to be positive "buzz" about most of them, but I don't have any idea of how that might be translating into actual sales.

S&W makes some great firearms - I own more than a few. But there are a number of pieces of legislation that could put a crimp in retail sales of a number of their products. I wonder if fear of that possible legislation is causing a temporary sales burst? And perhaps that temporary burst is being projected too far into the future?

Feb 24 03:25 PM

[bigmoney:]

I bought this stock a couple years back when it was trading at its high water mark, around $20/share. It fell off a cliff, and is trading today around $3.5. I could have bought a truck load of fine S&W firearms for the equivalent of my SWHC stock losses. Quality firearms hold their value quite well, probably comparable to gold. But they are hard to store.

Also, I own one of the old S&W shotguns, that was discontinued and is hard to get parts for. So I don't know about their long gun ambitions.

Feb 24 10:47 PM

[User 364308:]

I own 1700 shares that I have bought on lows, sold on highs then bought on highs. The acusition of Thomson Arms will have a possitive effect in due time. If anyone has tried their target pistols, they know how great and accurate the barrle rifleing is. Give them a little time.

Feb 25 03:16 PM