The Firearm Blog

Time to buy gun shares? CNBC says NO, and so do I.

While S&W (SWHC) sell a wide range of M&P branded AR-15s, Ruger (RGR) sells the Mini-14 / Mini-30 (and since recently high capacity Mini-14 magazines) and Olin Corp. (OLN, makers of Winchester branded ammo) is selling overprice ammo, along with everyone else, I suggest you stay away from all three.

So, why not Ruger and S&W? In 10 words … a gun sold today is a gun not sold tomorrow. There may be a mad rush to purchase evil semi-automatic rifles, handguns and “sniper” rifles today but in the long run, even if there is no AWB 2.0, sales will drop. If/when there is an AWB then sales will drop unless the manufactures manage to ensure the AR and Mini-xx family of rifles is are banned by name, and even then they will be competing with the pre-ban market.

So why not Olin? Apart from my prediction yesterday that ammo prices will drop in 2010 or sooner, Olin does many other chemical related manufacturing, ammo is only part of the business, so betting that the stock price will go up based on ammo prices would be a mistake.

Share price (60 day moving average in red) over the past year. Charts from Yahoo Finance:

Ruger

Olin Corp.


S&W

Ruger has just released their disastrous third quarter results. Their share price fell 37.71% as of Wednesdays close!

This graph shows the last three months of Ruger (RGR) trading. Click on the graph to expand it.

Their CEO, Michael O. Fifer, wrote a letter to Ruger shareholders. He had this to say:

For decades, Ruger introduced innovative designs on a regular basis, stimulating consumer demand. That strength has waned in the past few years with the passing of Bill Ruger, Sr. and a weakening of the product development resources at Ruger.

Nothing new here. It has taken them 20 years to clone the Glock pistol and produce the recently released SR9 striker fired pistol.

He goes on to say:

Ruger has not participated in some of the fastest growing segments of the consumer firearms market. These segments, which include AR-15 style rifles, compact carry pistols and revolvers, and striker-fired, auto-loading pistols, have recently been the engines of growth in the consumer firearms market.

Several of our top distributors have experienced growth rates in one or more of these categories in excess of 40% for the first nine months of the year. We plan to develop products for several of these markets. We recently had a very successful launch of our new striker-fired, auto-loading pistol, the Ruger SR9.

They have already launched a striker fired pistol so that leaves compact carry pistols and revolvers and AR-15 rifles.

Remington, one of their major competitors in the rifle market, have just announced their first line of AR-15 hunting rifles, the R-15.

The Remington R-15

I think Ruger will announce an AR-15 hunting rifle this time next year.

(The above photo is a photoshop I made… obviously. Not to mention the ‘evil’ 30 round magazine that Ruger will never sell.)

It makes perfect sense. The black, or more politically correct, camo rifles are what is selling.