RGR - Sturm Ruger & Co Inc.

[Castanza]

RGR just released a horrendous earnings report, with revenue down ~25% Y/Y. It appears that America's appetite for guns, seemingly insatiable during the Obama Administration, is abating.

 

https://ruger.com/corporate/PDF/ER-2019-07-31.pdf

 

Modern firearms are quite durable. With more than 1 firearm per capita in the US, I've often wondered about the various drivers of demand. New models seem to play a significant role, even more so when they are fad-driven like highly customized ARs have been over the past 10 or 12 years.

 

The best brands aren't public companies (Glock). Most people build their own AR-15's with parts from various different companies. And the AR's which people buy "complete" are generally from smaller companies which produce better products. Daniel Defense, Palmetto State Armory, etc. Seems to be moving more towards a high end custom market for firearms.

 

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

 

Shows number of background checks since 1998. Can't technically be correlated to sales, but you can kind of assume it (why else would you get a background check?). From a non-investing standpoint it's also difficult to judge sales because so many sales happen through private parties (person to person). I've never bought a firearm from a store. And most people I know also don't buy from stores or manufacturers.

 

$AOBC actually did pretty well this past quarter (Smith & Wesson) They sell the M&P Shield which is a really popular concealed carry firearm.

[Saluki]

RGR just released a horrendous earnings report, with revenue down ~25% Y/Y. It appears that America's appetite for guns, seemingly insatiable during the Obama Administration, is abating.

 

https://ruger.com/corporate/PDF/ER-2019-07-31.pdf

 

Modern firearms are quite durable. With more than 1 firearm per capita in the US, I've often wondered about the various drivers of demand. New models seem to play a significant role, even more so when they are fad-driven like highly customized ARs have been over the past 10 or 12 years.

 

I used to own SWB, which became SWHC then AOBC (multibagger!).  Firearms are a funny business.  It used to be that more than 1/2 of US households owned a gun.  Last time I checked it's about 35%, but the number of guns per gun owner has gone up (7 per owner).  A lot of them are people who run out and buy guns when politicians talk about gun control and owners think "THEY" are coming for your guns.

 

RGR is a pure gun play but AOBC has diversified into non-gun outdoorsy stuff like fishing and camping.  I think this is a mistake because it evens out the earnings but your investments could suffer if they boycott your non-gun stuff because of a shooting.  I still think AOBC has more potential growth than RGR because it's still new in the rifle space, still doesn't make have a shotgun and the S&W brand can be easilly licensed to other tangential products (ammo, vests, tactical gear etc).  Pistols are still most of AOBC's sales so if their breakdown of rifles/pistols gets to where RGR is, that represents a lot of growth. 

 

RGR was always more conservatively managed than S&W (no debt and a dividend vs growth).  I think with a product like this (or tobacco) that is bullseye for plaintiff's lawyers, it's probably a good idea to be loaded up with debt and leave as little chum on your balance sheets as possible. 

 

I sold the last of AOBC last year and an not looking to buy either company now. 

[JayGatsby]

Anyone looking at RGR or AOBC? (Seems like the discussion here is of both, so need to start a thread on AOBC)

 

So a few years ago SWHC diversified and became AOBC. From a capital allocation perspective that's been a disaster. They basically squandered all the money they made in the good years, spent a bunch of money integrating, and are now separating. Hopefully you can't make the same mistake twice?

 

News is reporting surging gun sales, but who knows how long that lasts. Toilet paper is also surging, but annual sales will (presumably) end up basically the same.

[Castanza]

You're better off buying an actual gun at this point. If the NAT guard gets deployed you will have Martial law meaning no gun sales (at least over the counter).