A Shortage of Bullets Presents Investment Opportunities

It's true. There is a shortage of bullets, and many stores are putting limits on how many bullets a customer can buy. Part of the increase is due to an increase in the demand for handguns, with gun permits increasing by over 25% from last year. Another reason is that gun owners are stocking up on bullets, just like stocking up on gold.

There are a couple of publicly traded companies that manufacture ammunition. Olin Corporation (OLN) makes Winchester Ammunition. The stock has a forward P/E of 36 and pays a 4.7% yield.

Alliant Techsystems Inc. (ATK) is another manufacturer of bullets and ammunition to law enforcement agencies and commercial customers. The stock has a forward P/E of 8.5 and doesn't pay a dividend. Earnings for the latest quarter were up over 27%.

Smith & Wesson Holding Corp. (SWHC) is primarily a maker and marketer of firearms. It has a forward P/E of 10 and has currently generated negative earnings.

Although bullets and ammo are a smaller portion of the revenues of these companies, there should be some benefit to the bottom line from the increase in sales.

Disclosure: Author does not own any of the above.

Comments

[Tom Armistead:]

The boom on ammo is something that happens during bad economic times, OLN commented on it during a recent conference call. It usually lasts 6 quarters and we are more than halfway through it.

No reason to chase it now. It does help OLN get through the flat spots in chlor-alkali: that's one reason they are hanging onto Winchester, it provides earnings when they need them most.

Sep 24 07:01 AM

[TBill:]

Bullets??? [Wince!] Stick to ammo or learn correct terminology.

Olin is far from a pure play.

I see ammo is becoming available again, tho high priced. Still not shooting my 380. At 80 cents a round, can't afford it. Instead, shooting my 45 at 50 cents. At least I now can find it.

Sep 24 11:33 AM

[The Hammer:]

with more guns being sold, I would expect more ammo to be used. Yes OLN commented on the last surge in ammo sales that it lasted 6 quarters. i do think this time that it may last longer since the economice upheaval is most severe since the Great depression. I expect more unrest around the country as the so called V shaped recovery does not pan out. Just take a look at food prices. There is a stealth increase going on. Just look at the smaller sizes for the same amount of money. 2-3-4 years from now when one morning we wake up and the dollar is devalued by 25% then prices spike up. Corruption is running wild in our govt.
Citizens have lost control of the govt. It is dominated by cronyism and special interests.

Sep 28 12:07 PM

[dann4520:]

Sorry but your a little behind the times I was buying Smith and Wesson, Ruger, and Cabelas back in November. You know, just after the election when they were about 1/4 of the price they are now. Also as far as I know Olin does not make the bullets they use in their ammunition and the ammunition segment is a rather small part of thier business.

Oct 08 02:50 PM