Ruger Remains Oversold

| About: Sturm, Ruger (RGR)
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In light of these ongoing tragedies, a robust national debate on school shootings should not exclude any potential solutions, from gun control, and mental health issues to school security. But speculation is rampant and very focused on gun control, which has led to drop in share price of Ruger (NYSE:RGR) and Smith and Wesson (SWHC).

On growth; Ruger has a recent history of introducing products that sell, from handgun sales fueled by an increase in CCW permits to women shooters to sales traditional hunting guns like the new All American rifles. Over the last few years, Ruger has accomplished increased sales while engaging in tighter supply chain and inventory control. While Ruger has discontinued older guns over the years, I'd be hard pressed to recall a recent market entry by Ruger that has not been successful.

On ammunition sales, there was a frenzy after the 2008 presidential election, but this time may be different. An upcoming article will analyze potential ammunition and ammunition component sales changes involving companies such as ATK (ATK) and Olin (NYSE:OLN).

On firearm sales; It really does not seem likely that Ruger's sales will decrease, gun control or not. A point that has escaped most media attention, in large part because Republicans have not been vocal, is that there is a substantial Republican majority in the US House of Representatives, which does not bode well for a substantial change in gun laws. It seems unlikely that legislation will affect Ruger's bottom line. Indeed, Ruger's modified .223 caliber semi-automatic rifles with wood stocks are sold in California, albeit with 10 round magazines. A friendly conversation at a local gun store was insightful. Many were there shopping, motivated by fear of a gun ban. An comment was made that if congress can't agree on a solution for preventing going of the Fiscal Cliff, what are the odds that gun control legislation can pass, legislation of the type that would impact Ruger's bottom line.

Speculation aside, Ruger is in a growing industry. This has been a paradigm shift from the historic trend. Guns are durable products, which did not lend towards robust growth. In the last few years, that has changed. Black Friday sales, 2012, were an all time high, including Ruger's sales. More recently, customers were waiting hours in line to complete gun sales, which require NICS checks, the day after Christmas. Ruger remains a conservative company with a good record of growth in a growing industry and issuing a special dividend suggest Ruger acts in share holder interest.

Disclosure: I am long RGR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.