Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Alliant Techsystems Inc. (ATK), Olin Corporation (OLN): Pistol-Packin’ Mamas and Profits

It’s almost impossible to get definitive statistics on actual gun ownership rates in the U.S., with the Pew Research Center saying it’s 37% and Gallup giving 43%. One thing the polls do point toward is more gun-owners than ever before cite protection as their primary reason for owning one, with women coming in at 65% and men at 42%.

And from the Christian Science Monitor, 15% of American women are gun owners, up 3% in the the last six years. Granted that it is not a dramatic increase, but the NRA has seen almost a twenty-fold increase in enrollment in its Women on Target gun training program since 2000. One Texas woman, who makes high end gun carry purses (a crocodile bag will set you back $3,400) has seen business rise 30% this year.

When I last visited Cabelas Inc (NYSE:CAB)‘s, there were just as many women filling out gun paperwork as men. The FBI reported a 53% increase in background checks for guns in the ninety days after the election.

Earn while they learn

One thing more women are doing is signing up for gun safety classes (hey, we actually read owner’s manuals). According to Joseph Terry, a former police officer who now takes gun safety classes, it really takes about 500 rounds of ammo to be considered proficient.

Where does all this ammo come from? Two companies mainly, Alliant Techsystems Inc. (NYSE:ATK) and Olin Corporation (NYSE:OLN). Their ammo divisions are merely one division of their larger businesses, defense and chemicals, respectively. There are not a lot of pure plays on ammo as Remington, privately owned by Cerberus Capital Management, is the only company that produces both firearms and ammo.

There has been an ammo shortage in the U.S. since the election, which is only recently easing up with some imports of ammo getting through and Remington ramping up production.

CEO Joseph Rupp of Olin Corporation (NYSE:OLN) said of its Winchester ammo division on the earnings call on July 25, “The elevated level of commercial demand that the Winchester business began to experience in the fourth quarter of 2012 continued through the second quarter. Second quarter 2013 commercial sales increased approximately 60% compared to the second quarter of 2012. And as a result, Winchester achieved the highest level of quarterly segment earnings in its history.”(source Seeking Alpha transcript).

And front and center on the call, he attributed the company’s robust earnings mainly to the ammo segment (record quarterly sales of $198 million) with their other two segments, Chemical Distribution and Chlor-Alkali, both seeing softer earnings.

Like gun manufacturers Sturm, Ruger & Company (NYSE:RGR) and Smith & Wesson Holding Corporation (NASDAQ:SWHC), which had major backlogs last year, the company has seen an increased backlog of $650 million from $255 million in June 2012. This good news comes on top of lower commodity prices for copper, lead, and zinc. CEO Rupp added,”Winchester sales continue to be limited only by their ability to produce product.”

Olin Corporation (NYSE:OLN) has a trailing P/E of only 12.58. It’s shareholder friendly, paying a yield of 3.30%, on the high end for the chemical industry. The company has paid a dividend consecutively for over 86 years. Olin has been buying back shares to the tune of 1 million shares, with 2 million left in the Board approved repurchase. Surprisingly, it is only up 16.67%, possibly because it is seen as more a chemical company with a legacy ammo business.

Competitor Alliant Techsystems Inc. (NYSE:ATK) also operates in three divisions: Armament Systems, Aerospace Systems, and its Security and Sporting segment which sells ammo as well as related equipment like scopes, reloading, and other paraphernalia to the military, government, law enforcement, and commercial retailers. This segment makes up a quarter of sales.

The Armaments System somewhat overlaps as it also makes ammunition and holds a leading position in small and medium caliber ammunition in the U.S. But, it also manufactures high tech weaponry and is highly sensitive to trends in government spending as is its Aerospace systems.

Realizing Sporting systems is its bread and butter and was its best performing division. Last year, the company acquired Caliber Co and its subsidiary Savage Sports, a firearm maker for $315 million.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.