Firearms - RGR and AOBC

[rkbabang]

Here's a good chart to look at: https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

 

You can see how low firearms sales were during the Bush presidency compared with Obama.  There was a small uptick right after 9/11/01 but then they went right back down.  My biggest fear as far as investing in RGR goes is that sales will drop more and more with Trump in the whitehouse and the Republicans controlling congress.  Redo your calculations with a negative 10-20% growth rate for the next 2 years and a flat growth rate for the 6 years after that, which I think is the worst case.  If this happens that may be a good time to pickup some RGR shares.  But on the other hand RGR is already way below its high, so some of these expectations might already be baked into the stock price.  For me the possible negatives outway the cheap looking price at the moment. 

 

Then again Trump is the master of uncertainty and with uncertainty comes fear.  Also the disdain for him has caused public violence to make the news. Uncertain times are probably good for firearms sales, so maybe sales won't drop off.

 

That gives a value under $20 & if that happened, I'd load up.

 

That said; if it drops to the low to mid $40's I'll add more (I'm also shopping for a sword, pike & bow right now as the Zombie apocalypse seems imminent...)

 

Somewhere between $20 to $40 I'd be loading up as well.

 

I know you like to fight up close and personal and have your heart set on a sword, pike & bow, but you should really consider this loaded with zombie rounds.

 

Everyone knows that Zombies are attracted to loud noises.

 

Guns would be needed for protection against live humans.

 

I think that forming 2 squads with one aimed at Zombies (and hunting for food) & one for protection against hostile humans would be the way to go (I'd keep a sidearm as a backup; probably a totally reliable Blackhawk...)

 

?

 

The loud noise problem is real and one that the Republicans in congress are trying to solve.

http://lawofficer.com/tactics-weapons/handguns/bill-to-legalize-silencers-introduced-in-congress/

 

Hopefully this will pass and Trump will sign it. 

 

[DooDiligence]

Here's a good chart to look at: https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

 

You can see how low firearms sales were during the Bush presidency compared with Obama.  There was a small uptick right after 9/11/01 but then they went right back down.  My biggest fear as far as investing in RGR goes is that sales will drop more and more with Trump in the whitehouse and the Republicans controlling congress.  Redo your calculations with a negative 10-20% growth rate for the next 2 years and a flat growth rate for the 6 years after that, which I think is the worst case.  If this happens that may be a good time to pickup some RGR shares.  But on the other hand RGR is already way below its high, so some of these expectations might already be baked into the stock price.  For me the possible negatives outway the cheap looking price at the moment. 

 

Then again Trump is the master of uncertainty and with uncertainty comes fear.  Also the disdain for him has caused public violence to make the news. Uncertain times are probably good for firearms sales, so maybe sales won't drop off.

 

That gives a value under $20 & if that happened, I'd load up.

 

That said; if it drops to the low to mid $40's I'll add more (I'm also shopping for a sword, pike & bow right now as the Zombie apocalypse seems imminent...)

 

Somewhere between $20 to $40 I'd be loading up as well.

 

I know you like to fight up close and personal and have your heart set on a sword, pike & bow, but you should really consider this loaded with zombie rounds.

 

Everyone knows that Zombies are attracted to loud noises.

 

Guns would be needed for protection against live humans.

 

I think that forming 2 squads with one aimed at Zombies (and hunting for food) & one for protection against hostile humans would be the way to go (I'd keep a sidearm as a backup; probably a totally reliable Blackhawk...)

 

?

 

The loud noise problem is real and one that the Republicans in congress are trying to solve.

http://lawofficer.com/tactics-weapons/handguns/bill-to-legalize-silencers-introduced-in-congress/

 

Hopefully this will pass and Trump will sign it.

 

Might make it easier for people to sleep in Chicago without all that noise...

[rkbabang]

Here's a good chart to look at: https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

 

You can see how low firearms sales were during the Bush presidency compared with Obama.  There was a small uptick right after 9/11/01 but then they went right back down.  My biggest fear as far as investing in RGR goes is that sales will drop more and more with Trump in the whitehouse and the Republicans controlling congress.  Redo your calculations with a negative 10-20% growth rate for the next 2 years and a flat growth rate for the 6 years after that, which I think is the worst case.  If this happens that may be a good time to pickup some RGR shares.  But on the other hand RGR is already way below its high, so some of these expectations might already be baked into the stock price.  For me the possible negatives outway the cheap looking price at the moment. 

 

Then again Trump is the master of uncertainty and with uncertainty comes fear.  Also the disdain for him has caused public violence to make the news. Uncertain times are probably good for firearms sales, so maybe sales won't drop off.

 

That gives a value under $20 & if that happened, I'd load up.

 

That said; if it drops to the low to mid $40's I'll add more (I'm also shopping for a sword, pike & bow right now as the Zombie apocalypse seems imminent...)

 

Somewhere between $20 to $40 I'd be loading up as well.

 

I know you like to fight up close and personal and have your heart set on a sword, pike & bow, but you should really consider this loaded with zombie rounds.

 

Everyone knows that Zombies are attracted to loud noises.

 

Guns would be needed for protection against live humans.

 

I think that forming 2 squads with one aimed at Zombies (and hunting for food) & one for protection against hostile humans would be the way to go (I'd keep a sidearm as a backup; probably a totally reliable Blackhawk...)

 

?

 

The loud noise problem is real and one that the Republicans in congress are trying to solve.

http://lawofficer.com/tactics-weapons/handguns/bill-to-legalize-silencers-introduced-in-congress/

 

Hopefully this will pass and Trump will sign it.

 

Might make it easier for people to sleep in Chicago without all that noise...

 

Good point. It makes the guns a lot longer though.  Gang-bangers are going to need baggier pants.

 

[DooDiligence]

Also would gang banger still apply (maybe gang poofter...)

[no_free_lunch]

Can't believe I am referencing them but there was a good vice video on gun ownership in America the other day.  I can't seem to find the link and their site is down, perhaps I will add it later.

 

The key take aways I got:

 

- They break out gun ownership by ethnicity and it is roughly 40% of whites, 20% african american, 20% latinos families own a firearm.  So maybe not a completely tapped out market.

- Since election, vice claims, gun clubs for minorities have seen surges in membership.

 

I am interested in this industry and will be investigating.  Some ethical issues here for sure, I will have to think about that.

[no_free_lunch]

Started a position in AOBC.  This is just Smith & Wesson after a name change.  RGR is no doubt a great brand but it's a bit harder to get a handle on their financials.

[no_free_lunch]

There are some good FBI stats on firearm background checks here:

 

https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

 

You can see in the link that there wasn't any kind of dip when Bush took over.  There was a steady increase after Obama took over but then the numbers were already ramping up during the last few years of the Bush jr presidency.

 

I have also read that there may be increased efforts at the state level to introduce gun control laws now that national efforts are shut down.

[DooDiligence]

There are some good FBI stats on firearm background checks here:

 

https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

 

You can see in the link that there wasn't any kind of dip when Bush took over.  There was a steady increase after Obama took over but then the numbers were already ramping up during the last few years of the Bush jr presidency.

 

I have also read that there may be increased efforts at the state level to introduce gun control laws now that national efforts are shut down.

 

Nice link - thanks!

 

Looks like checks have steadily marched upwards on a yearly basis.

 

Not sure how I feel about that other than (optimistic about gun sales & increased gun violence...)

 

State interventions should ratchet up the fear factor for increased sales.

 

I'm gonna stick with my sword, pike & bow armory & will participate in firearms ownership through an equity stake in RGR...

[no_free_lunch]

Not sure how I feel about that other than (optimistic about gun sales & increased gun violence...)

 

The way I see it, this is happening one way or the other.  With or without AOBC & RGR.  I also believe that it's criminal to prevent people from having a firearm given the gun violence levels you see in some areas.

 

State interventions should ratchet up the fear factor for increased sales.

 

I agree, I should have elaborated but that was the point I was trying to make.

 

 

[rkbabang]

Not sure how I feel about that other than (optimistic about gun sales & increased gun violence...)

 

The way I see it, this is happening one way or the other.  With or without AOBC & RGR.  I also believe that it's criminal to prevent people from having a firearm given the gun violence levels you see in some areas.

 

 

There have been massive increases in gun sales in the last 30 years as well as massive move to liberalize concealed carry laws. Crime has also decreased significantly in that time. Now I know it is controversial to say these things caused the crime reductions, but it is pretty clear that it didn't prevent them. Outside of a few troubled places such as Chicago, the US really isn't much more dangerous than Canada and Europe.  I don't see any moral problems with hoping for increased firearms sales.

[no_free_lunch]

To continue my last comments.  I can see firearm sales continuing to do well.  Not 100% certain but it seems more likely than not.  However I am not sure which companies will benefit. 

 

I did some digging on AOBC and have a small position but I am not crazy about the company.  Yeah they have done some share repurchases but also they have been acquiring.  Acquisitions are not always bad but unless management is exceptional I prefer organic growth.  At least with the acquisitions they are trying to diversify.  It is definitely cheap on a PE basis, probably around 8.5-9x and maybe a bit higher to free cash flow.  However there is also a lot of competition.  So it is sort of some good, some bad, etc.  However, at the end of the day it should probably trade at a higher valuation if sales don't plummet, or even stabilize 10-15% lower than they are now.  If sales stabilize at current levels they could probably trade 50% higher or closer to where they were earlier this year.

 

Since I am not crazy about any one company, perhaps a basket approach is best.  Any suggestions to add to the list?

[johnny]

It seems obvious to me that gun sales are not going to do as well under Trump as Obama. We're looking at -20% YoY for Trump's America so far, and frankly, I'd expect that to get a little bit wider.

 

Even though most of the political activity centered around banning rifles, what I have observed is that rifle panics end up driving a lot of non-gun people to jump through many informational hoops in order to get The Rifles They Want, and then they find that most of the friction to building out their handgun collection has also been removed, so they do that.

 

In California there was quite a rifle panic through 2016. The naive expectation might have been that gundollars would be re-allocated from pistols to rifles for the period, but what I actually observed instead was that people were instead generally going gun-crazy, and buying pistols at a pace that I think they will be unlikely to sustain indefinitely.

 

So, I can see very clearly the case for dramatically lower volumes. But I have no clue if that is 20 or 30 or 40%.

 

I also am especially concerned, having looked at Ruger's website, with the fact that most of their guns seem to be garbage. It seems to me that there are a lot of cutesy regulations that have the effect of limiting foreign competition, and that a "pro gun" administration is just as likely to do damage to domestic gun companies by gutting those regulations as it is to help out by taking away the $200 tax stamp on silencers.

[rukawa]

I also am especially concerned, having looked at Ruger's website, with the fact that most of their guns seem to be garbage.

 

How do you know this...based on personal experience?

[johnny]

I certainly haven't shot many Ruger firearms, but that is because the high-income gun-nuts that I know simply don't own them, or if they do own them, don't consider them worth yanking out of the safe for the trip.

 

Maybe it's because I live in such a cosmopolitan state, but it seems to be relatively well-agreed upon among shooters (that aren't draping themselves in the American flag and occupying forest stations) that:

 

1. Mass produced weapons out of Europe (and Israel) are generally superior and that

2. European-designed weapons manufactured in America are lower quality than the same weapon designs manufactured in America and that

3. The only downside to these weapons is that they are generally quite expensive, which has a lot more to do with regulation and protectionism than underlying production economics (Glocks cost less than a hundred dollars to manufacture, which is probably less than Ruger's production cost per unit for its vastly inferior striker-fired series).

 

I guess if you wanted to test the "common" wisdom you would ask what the recent procurement decisions are for informed police forces, special tactics teams, the standard military, etc. SOCOM is toting around the FN Scar (Belgium) as their rifle, the army just recently chose the Sig P320 (Germany) to replace the long-serving Beretta M9 (Italy) as service pistol. And of course "America's gun" was invented by the very un-American sounding Gaston Glock (Austria), and that seems to be what almost every cop is toting, although I can't be sure because cops tend to get spooked when I stare too hard at their holsters.

 

AFAIK, Ruger is a non-entity in these contract wars, and the only historical significance of Smith and Wesson is that they used to be the standard for law enforcement until too many LEO kept getting slaughtered by baddies with better weapons. Hence Glock becoming America's Gun.

 

I hope it's clear that I've not even opened the Ruger 10-K, so I'm not at all making a specific investment call here; just throwing out some things that pop into my head when I think of the name Ruger. I'm also no gun expert, so I'm susceptible to kool-aid on this stuff.

[DooDiligence]

Ruger doesn't break out goverment or law enforcement sales in the K's & Q's but the following link has an interesting discussion on the subject (it's from 2013 & I believe the ideas are as enduring as guns are in American society.)

 

http://rugerforum.net/ruger-pistols/93444-ruger-sr-law-enforcement.html#/topics/93444?page=1&_k=mttjha

 

Fact is; Ruger makes high quality firearms (in store comparisons of workmanship, feel, action & safety features) & they seem to sell quite a few of them.

 

I'm willing to bet that there's a fair bit of gun snobbery among "collectors" & other non-professional enthusiasts.

 

I have owned guns (decades ago) but haven't owned or fired one in forever (seems like a waste of time.)

 

Ruger reports 2016 full year tomorrow & I'd like to buy more (cheaper...)

[rkbabang]

I certainly haven't shot many Ruger firearms, but that is because the high-income gun-nuts that I know simply don't own them, or if they do own them, don't consider them worth yanking out of the safe for the trip.

 

Maybe it's because I live in such a cosmopolitan state, but it seems to be relatively well-agreed upon among shooters (that aren't draping themselves in the American flag and occupying forest stations) that:

 

1. Mass produced weapons out of Europe (and Israel) are generally superior and that

2. European-designed weapons manufactured in America are lower quality than the same weapon designs manufactured in America and that

3. The only downside to these weapons is that they are generally quite expensive, which has a lot more to do with regulation and protectionism than underlying production economics (Glocks cost less than a hundred dollars to manufacture, which is probably less than Ruger's production cost per unit for its vastly inferior striker-fired series).

 

I guess if you wanted to test the "common" wisdom you would ask what the recent procurement decisions are for informed police forces, special tactics teams, the standard military, etc. SOCOM is toting around the FN Scar (Belgium) as their rifle, the army just recently chose the Sig P320 (Germany) to replace the long-serving Beretta M9 (Italy) as service pistol. And of course "America's gun" was invented by the very un-American sounding Gaston Glock (Austria), and that seems to be what almost every cop is toting, although I can't be sure because cops tend to get spooked when I stare too hard at their holsters.

 

AFAIK, Ruger is a non-entity in these contract wars, and the only historical significance of Smith and Wesson is that they used to be the standard for law enforcement until too many LEO kept getting slaughtered by baddies with better weapons. Hence Glock becoming America's Gun.

 

I hope it's clear that I've not even opened the Ruger 10-K, so I'm not at all making a specific investment call here; just throwing out some things that pop into my head when I think of the name Ruger. I'm also no gun expert, so I'm susceptible to kool-aid on this stuff.

 

I'm a Glock guy myself, if Glock was public I would already own it, there is no question that they are the best semi-auto handguns on Earth.  But Ruger is a quality company which makes a quality product.  No one makes a better revolver, no one.  And as far as semi-auto goes, as I said above, I just purchased a Ruger LCP II.  Yes if Glock made a .380 of a similar size I would have went with the Glock, but they don't.  My main carry gun is a Glock 26 in 9mm, but depending on what you are wearing, it isn't always easy to conceal.  Glock has a single stack .380, but it is huge compared to the Ruger, certainly not a gun you can throw in your front pants pocket.  For pocket carry .380s there is Ruger LCP & LCP II, Beretta Pico, and a bunch of lower quality guns from other brands.  For revolvers there is really no option better than Ruger.  Ruger makes a quality rifles as well, although there is a lot of competition in that space.  I just don't think it is accurate to say Ruger makes garbage.

 

[johnny]

Thanks for the pushback, definitely helps me Get the company a bit. I have to admit revolvers are totally nonexistent to me, and when I was cruising through Ruger's site it was solely in pistols and rifles. I shot and hated the LC9, but obviously it lacks some of the specific advantages of the LCP that you mentioned.

 

Is anybody aware of a data source that gives an idea of what the makeup of gun sales, by caliber, looks like?

[Dustin T]

I certainly haven't shot many Ruger firearms, but that is because the high-income gun-nuts that I know simply don't own them, or if they do own them, don't consider them worth yanking out of the safe for the trip.

 

Maybe it's because I live in such a cosmopolitan state, but it seems to be relatively well-agreed upon among shooters (that aren't draping themselves in the American flag and occupying forest stations) that:

 

1. Mass produced weapons out of Europe (and Israel) are generally superior and that

2. European-designed weapons manufactured in America are lower quality than the same weapon designs manufactured in America and that

3. The only downside to these weapons is that they are generally quite expensive, which has a lot more to do with regulation and protectionism than underlying production economics (Glocks cost less than a hundred dollars to manufacture, which is probably less than Ruger's production cost per unit for its vastly inferior striker-fired series).

 

I guess if you wanted to test the "common" wisdom you would ask what the recent procurement decisions are for informed police forces, special tactics teams, the standard military, etc. SOCOM is toting around the FN Scar (Belgium) as their rifle, the army just recently chose the Sig P320 (Germany) to replace the long-serving Beretta M9 (Italy) as service pistol. And of course "America's gun" was invented by the very un-American sounding Gaston Glock (Austria), and that seems to be what almost every cop is toting, although I can't be sure because cops tend to get spooked when I stare too hard at their holsters.

 

AFAIK, Ruger is a non-entity in these contract wars, and the only historical significance of Smith and Wesson is that they used to be the standard for law enforcement until too many LEO kept getting slaughtered by baddies with better weapons. Hence Glock becoming America's Gun.

 

I hope it's clear that I've not even opened the Ruger 10-K, so I'm not at all making a specific investment call here; just throwing out some things that pop into my head when I think of the name Ruger. I'm also no gun expert, so I'm susceptible to kool-aid on this stuff.

 

I'm a Glock guy myself, if Glock was public I would already own it, there is no question that they are the best semi-auto handguns on Earth.  But Ruger is a quality company which makes a quality product.  No one makes a better revolver, no one.  And as far as semi-auto goes, as I said above, I just purchased a Ruger LCP II.  Yes if Glock made a .380 of a similar size I would have went with the Glock, but they don't.  My main carry gun is a Glock 26 in 9mm, but depending on what you are wearing, it isn't always easy to conceal.  Glock has a single stack .380, but it is huge compared to the Ruger, certainly not a gun you can throw in your front pants pocket.  For pocket carry .380s there is Ruger LCP & LCP II, Beretta Pico, and a bunch of lower quality guns from other brands.  For revolvers there is really no option better than Ruger.  Ruger makes a quality rifles as well, although there is a lot of competition in that space.  I just don't think it is accurate to say Ruger makes garbage.

 

I concur with that, I think it's just Johnny's crowd and for their purposes it may be true. Glock makes a great gun but so does Ruger. It may not be the equivalent of a high end pistol but the idea that a Ruger is "vastly inferior" to a Glock makes me wonder what their metric is. It's not vastly more accurate, or vastly more reliable. It all depends on what you are doing. For shooters that compete one gun may be vastly inferior to another based on weight, reload time or other factors that wouldn't seem obvious at first. One mans perfection may be another man's junk.

 

 

[DooDiligence]

Thanks for the pushback, definitely helps me Get the company a bit. I have to admit revolvers are totally nonexistent to me, and when I was cruising through Ruger's site it was solely in pistols and rifles. I shot and hated the LC9, but obviously it lacks some of the specific advantages of the LCP that you mentioned.

 

Is anybody aware of a data source that gives an idea of what the makeup of gun sales, by caliber, looks like?

 

http://lmgtfy.com/?q=Gun+sales+by+caliber

 

Revolvers will be more reliable & easier to maintain when the Zombie apocalypse comes...

[rkbabang]

Thanks for the pushback, definitely helps me Get the company a bit. I have to admit revolvers are totally nonexistent to me, and when I was cruising through Ruger's site it was solely in pistols and rifles. I shot and hated the LC9, but obviously it lacks some of the specific advantages of the LCP that you mentioned.

 

Is anybody aware of a data source that gives an idea of what the makeup of gun sales, by caliber, looks like?

 

http://lmgtfy.com/?q=Gun+sales+by+caliber

 

Revolvers will be more reliable & easier to maintain when the Zombie apocalypse comes...

 

Interesting link I found with your assisted google search.

 

http://www.gunbroker.com/Content/Top5/2015-GunBroker-Best-Selling-Firearms-of-the-Year.html

 

Also if this is correct  http://knowledgeglue.com/what-are-the-most-popular-calibers-in-the-us/  then 9 of the top 10 calibers sold are semi-auto or rifle calibers.  Number 10 and 11 are revolver (.357Mag & .38Spc).

 

 

Also in other gun related news, my state of NH just got rid of its concealed carry license requirement.  The governor signed the bill today and it goes into effect immediately.  There are a few other states with similar bills pending now as well.  https://freestateproject.org/blogs/constitutional-carry-signed-law

[boilermaker75]

I want some Colt Walkers like this guy's.

 

[DTEJD1997]

Hey all:

 

I've got some "associates" who swear by FN 5.7! 

 

Has anybody ever tried a P90?  A FN 5.7 pistol?

 

Very interesting design/engineering.  I've heard the Secret Service uses these items...

[no_free_lunch]

AOBC released earnings.  Revenue up 11% for the quarter ending Jan 31.  So this takes into account 2 months post election.  If the bear case was fear of firearm legislation then this provides evidence against that.  Still not sure about the company in general, whether this is a good industry that sort of thing but at 8x basic earnings per share the future is heavily discounted.

 

American Outdoor Brands Corporation AOBC reported financial results for third-quarter fiscal 2017 ended Jan 31, 2017. The company's adjusted earnings per share of 66 cents surpassed the Zacks Consensus Estimate of 54 cents by 22.2%. Reported earnings also grew 11.9% from the year-ago level of 59 cents.

 

http://www.nasdaq.com/article/american-outdoor-brands-aobc-tops-q3-earnings-up-yy-cm755911

[valueventures]

I picked up some shares this morning below $18. I've had my eye on AOBC for a few weeks and was surprised to see such a sell-off after a reasonably strong quarter.

[no_free_lunch]

Good dig.  I bought more but at $18.50.  Now a 2% position.  I don't like that there is so little moat within this industry, so I think I will just leave it as a smaller position.  I keep thinking that these firearms were produced 100 years ago with very similar designs.  I am really just trusting to the historical precedent that they have maintained good margins and the low price.

 

Having read a bit more, the speculation is that weak 2017 guidance pushed the price down.  So there was something behind it.  However, apparently they have a history of delivering low estimates and then exceeding them.  Current quarter EPS was about 20% higher than average forecast for instance.  There is a decent seeking alpha article on it if anyone is interested.