Guns: One of America's Last Growth Industries

I was trying to figure out why Smith & Wesson (SWHC) was surging 10% today outside of general "glee"; I didn't realize that peer Sturm, Ruger & Co (RGR) reported last night. Well folks, we might be shrinking most of our industry especially of the manufacturing sort - it was either guns or butter - we still have massive defense contractors and guns. They will never take that away from us.

RGR beat estimates of $0.24 handily ... with $0.30. Go team USA. I need to add to my SWHC position... wow look at these metrics. This stock is below 15x forward earnings for massive growth while people are bidding up shrinking companies at 30x forward earnings. Just love the stock market.

• Sturm, Ruger & Company, Inc. (NYSE: RGR - News), announced today that for the first quarter of 2009, the Company reported net sales of $63.5 million and earnings per share of $0.30, compared with sales of $42.5 million and earnings per share of $.07 in the first quarter of 2008.

Wow that is 50% revenue growth. Guns and masses of unemployed... a magic combination to look forward to in the year ahead.

• The level of demand for our products during the first quarter of 2009 has been unusually high, with more than 500,000 units ordered.
• Our firearms sales grew 55.5% from the first quarter of 2008 and 8.7% from the fourth quarter of 2008.
• Our backlog grew to 458,900 units and $136.3 million at the end of the first quarter of 2009, from 175,900 units and $47.8 million at the end of 2008. (wow! 160% unit growth and 183% dollar growth)

Sturm, Ruger was founded in 1949 and is one of the nation’s leading manufacturers of high-quality firearms for the commercial sporting market.

[Apr 12: 60 Minutes - the Way of the Gun]

[Apr 9: Some Link Economy with Spate of Killings]

[Apr 6: Starting Smith & Wesson Position]

Disclosure: Long Smith & Wesson in fund; no personal position

Comments

[Lee Eugene ...:]

I would be looking at a possible short here once the traders loose interest in this fad. You will see the warning signs by tracking new permit applications. This seems played out, but I wish I owned them!!!

Apr 29 05:27 PM

[PainfullyAware:]

I do not think this lies in the realm of "Fad" at this point. More than likely the realm of "Fear".

As more people realize what is happening in the United States and abroad the Centralized Structures appear to becoming more unstable.

There is a moderate "Prepare For The End Of The World" contingent but I think that the main drive is in the "Obama and Friends are going to outlaw some segment of firearms and/or ammo" and the "Crime is going to rise with unemployment and the police will not be there quick enough" groups.

I do not think this will subside until stability comes back.

The fervor I am seeing is not abating.




On Apr 29 05:27 PM Lee Eugene Munson wrote:

> I would be looking at a possible short here once the traders loose
> interest in this fad. You will see the warning signs by tracking
> new permit applications. This seems played out, but I wish I owned
> them!!!

Apr 29 06:04 PM

[User 404538:]

Regardless of what they say, we know Obama and the other big city socialist democrats are opposed to gun ownership by the civilians population and now they have unchecked power they will eventually pass laws making its impossible to keep or carry a self defense weapon. The same is true for ammunition. So, people are stocking up while they can.

Apr 29 08:01 PM

[Veneratio:]

Ahhhhh. I don't understand! Why do so many people misspell the word "lose" ?!?! Honestly, I have seen this word misspelled more times on the internet than I can count with a calculator. Makes absolutely no sense.


On Apr 29 05:27 PM Lee Eugene Munson wrote:

> I would be looking at a possible short here once the traders loose
> interest in this fad. You will see the warning signs by tracking
> new permit applications. This seems played out, but I wish I owned
> them!!!

Apr 29 11:26 PM

[Augustus:]

Those buying the guns and ammo are simply guaranteeing that they have a future vote, no matter what the government becomes. With all of the existing gun supply in the hands of the general population, it is pretty amazing that sales of new guns has taken off so strongly.

Apr 30 09:11 AM

[john s. gordon:]

well i live in virginia, a notorious gun state, the national NRA headquarters is just down the street from me ("the right of every 12 year old male to take his uzi to school & blow away his classmates will not be infringed").
with all the loose guns & all the wandering unemployed, the next big thing will be sales of personal body armor to civilians. some reports indicate that professional bankrobbers are already using it.
> jack

Apr 30 09:22 AM

[Gedankonomist:]

You watch too much TV.

On Apr 30 09:22 AM john s. gordon wrote:

> well i live in virginia, a notorious gun state, the national NRA
> headquarters is just down the street from me ("the right of every
> 12 year old male to take his uzi to school & blow away his classmates
> will not be infringed").
> with all the loose guns & all the wandering unemployed, the next
> big thing will be sales of personal body armor to civilians. some
> reports indicate that professional bankrobbers are already using
> it.

Apr 30 01:07 PM

[fireball:]

the 2nd was never about hunting, target shooting, self defense, indian fighting or any of the perepherial reasons mumbled by politicians, judges, and lawyers. it was to keep govt. afraid of the people instead of the reverse. the second reason was to discourage invasion by foriegn troops. it is a reasonable argument that the revolutionary war began because the british wished to disarm the colonists.
i do not fear gang punks with a cheap handgun as few can shoot their own foot on purpose. i do fear soldiers following bad political leadership because trained, disciplined soldiers should be feared by civilians.

john s. gordon
my father taught me to shoot well by age 10. by age 12 i went hunting with 4 particular friends on a daily basis. every morning i walked by a rack of assorted shotguns and low, medium, and high powered rifles. never once did i contemplate using one on a human. i knew that a healthy creature does not easily or painlessly give up the ghost. there are no clean, easy deaths except in video/movie land. i blame bad parenting for child violence. look at the cruelty of kids on you-tube. when we fought the worst was a lost tooth or broken nose or hand. "i give" was the end of it. usually i find your comments helpful and well reasoned even when i disagree.
please take a look at the statistics of rising crime in australia and the nature of those crimes since the gun ban. please examine kennesaw, geogia and compare the %s to "gun-free" d.c.. maybe compare new york to say houston.
sorry john, i happen to respect your views so ask that you consider.

a gun that is taken care of can last for generations. painfully aware is right. it is fear of more unonstitutional law and fear of an uncertain world.

Apr 30 03:01 PM

[john s. gordon:]

fireb - i am thinking columbine and VPI blacksburg. these are things that never should have happened.
the 1776 war had several causes (these among others):
colonists objected to forced billeting of english soldiers in private homes (england too cheap to build proper barracks?).
colonists objected to taxation by england to pay for the 1759-63 war with france.
colonists objected to england's mercantile economic policy which prevented colonists manufacturing their own shovels for pete's sake, much less manufacturing their own firearms.
i keep a number of guns in the house & know how to use them wisely. none of them are automatic attack weapons of the type so dearly loved by the NRA. i have trained my son to use them wisely. my father always kept guns in the house & made sure that i was trained to use them wisely.
part of the problem we are having all over the country is television - TV glorifies gun violence (and car chases too) in order to keep viewers glued to the tube so as to stuff commercials into your face.
the language of the 2nd deals with a well regulated militia for use in cases of insurrection or civil commotion. today we have a national guard regulated individually by the governor of each state for that purpose.
> jack

Apr 30 08:55 PM

[fireball:]

john s. gordon
as usual a well thought, very good answer, thank you.
agreement on the causes of the r.w.. however the catalyst at concord could be argued over the seizure of arms.
i have heard the national gaurd points many times. it was a good check to balance federal military might. trouble is they have been federalised. i think it would be difficult to substitute "national guard" throughout the founding documents for "the people". also while they are off in iraq or wherever it is difficult for them to keep order or defend these borders. i liked the idea of the governers having the ability to combine against a bad federal situation but that seems to have been nullified. the arms were to be equal to the military arms of the day. that has most definitely been infringed. it is also the defining point that govt. should fear the people. because criminals illegally acquire full-auto arms is not good reason for law-abiding citizens not to possess the arms of their choice. there was a cartoon several years back called "that's jake". a friend in his home notices his hunting weapons and asks what they are for. he replies, "to hunt". he then inquires about the ar-15. jake replies, "in case my govt. decides i can't have those", referring to the hunting guns.
still the number one reason for the armed public was to keep them armed in case of rogue govt.. i am not feeling very represented these last few decades. there is another coincidence. where governments disarm the public it seems cleansings or mass executions follow. i can't recall humphrey's exact words but he seemed to voice the sentiment of a counter to govt. force. he is only one of many. at the luby's massacre in texas there is very interesting testimony from a woman who was there and lost her parents.
agreement about the boob tube. on the mass shootings i have come across an oddity. it seems every case that i have examined has the shooter on some kind of anti-depressant, mood enhancer, or attitude adjuster. colombine the drugs were there. vp blacksburg i have not looked at.
it is good to have reasonable conversation. i will re-examine my reasoning again because as i said i have respect for your ideas sir.

May 01 11:33 AM

[john s. gordon:]

well i can't fully agree with your position but i respect your right to have it. reasonable dialogue is always beneficial, i wish the world could have more of it.
> jack

May 05 10:37 AM