Smith and Wesson Holding Corp (SWHC), Sturm, Ruger & Co. Inc. (RGR): A Bang for Your Buck?

Page 1 of 2

Investors who follow gun manufacturers such as Smith and Wesson Holding Corp (NASDAQ: SWHC) and Sturm, Ruger & Co. Inc. (NYSE:RGR) may think that December’s double-digit percentage decline was an exaggerated reaction to the announced effort on stricter gun control.

Smith & Wesson Holding Corporation (NASDAQ:SWHC)

2013′s rally in these stocks hints that investors may not be as concerned now that more is understood about the proposed gun legislation.  On January 18th, The Motley Fool published the article, “Poll Shows Americans Want Stronger Gun Laws… Sort Of.” One of the main points in that article was that most Americans polled were not in support of an assault weapon ban or a high-capacity magazine ban for firearms, although there is a general consensus that background checks in relation to private party sales should be enforced at gun events. Here’s what we had to say about this situation after the November Presidential Election.

With that said, legislation for assault weapon restriction could still move in either direction.  This article questions if this legislation is really holding a proverbial gun to long-term investors’ heads, and we can look at what some hedge funds doing with their Smith and Wesson and Sturm, Ruger & Co. holdings to get an idea of what bigger players in the market are doing.

Jim Simons’ hedge fund, Renaissance Technologies, has upped its stake in Smith and Wesson by 55% compared to the previous quarter. Simons reduced his Sturm, Ruger & Co. position by about 18%. This is likely just some profit taking on recent highs, however (see Simons’ entire 13F portfolio here). Route One Investment Company, meanwhile, is another major hedge fund that currently keeps 2.2% of its total funds in Smith and Wesson along with 1.34% in Sturm, Ruger and Co (see Route One’s other stock picks). That’s a strong vote of confidence from two well-managed hedge funds.

Let’s get back to the crux of the situation. The estimated market cap for domestic non-military modern sporting rifles, the targeted style of gun in new legislation, represents approximately 18.7% of the total firearm market, and about 18.2% of Smith and Wesson’s net sales.  Rifles in general (modern sporting rifles and hunting rifles weren’t distinguished in Sturm, Ruger & Co’s 2011 financial statements) accounted for about 25% of total sales. It wouldn’t be fair to say that all of this revenue would disappear for each company if a ban on assault rifles were implemented, though.  Some of Smith and Wesson’s revenues come from military and law enforcement sales, and the same can be said for Sturm, Ruger & Co.

Smith and Wesson’s 2010 10-K states: “During the surge in consumer demand after the 2008 presidential election, modern sporting rifles represented the fastest growing segment of the long-gun market.”

Investors can’t be led to seriously believe that the big players investing in gun producers didn’t see the immanency of an assault rifle ban coming, can they?

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!