Investors have been fired up about gun stocks.
All after, people bought about 23 million guns last year, according to Small Arms Analytics, as reported by CNN. Year over year, that was an increase of 65%. Plus, with Congress trying to make it tougher to buy guns, it could lead to even more gun sales. In fact, the House recently passed two guns bills.
“The first bill passed 227-203, with only eight Republicans, and would impose background checks for even person-to-person gun sales. The other bill passed 219-210, with only two Republican votes. This would extend the window for background checks to 10 days from three. The bills are aimed at making it harder to acquire and own guns,” according to The Wall Street Journal’s Editorial Board.
With higher gun sales likely, here are some of the top stocks to consider.
- Smith & Wesson Brands (NASDAQ:SWBI)
- Sturm, Ruger & Co. (NYSE:RGR)
- Vista Outdoor (NYSE:VSTO)
- American Outdoor Brands (NASDAQ:AOUT)
- Ammo Inc. (NASDAQ:POWW)
Gun Stocks to Lock and Load: Smith & Wesson Brands (SWBI)
The last time I weighed in on gun stocks, like SWBI, I said, “On a recent pullback to $16.50, I’d use the weakness as opportunity, especially with guns flying off the shelves.” That was on Jan. 29, as the stock traded at a low of $16.25. At the moment, SWBI is up to $17.85.
From here, I’d like to see a near-term test of $23.50.
Earnings have also been solid for the SWBI stock. In the third quarter, net sales came in at $257.6 million, as compared to $127.4 million year over year. Gross margins improved to 42.6% from 28% year over year, as well. In the quarter, SWBI also declared a $100 million share buyback, and a dividend of five cents a share.
Sturm, Ruger & Co. (RGR)
Investors have been just as fired up over the RGR stock, too. Since I last weighed in on the stock on Jan. 29, it ran from a low of about $61 to just over $70. At the moment, it’s technically overbought at double top resistance. Failure could send it to $62.50, near-term. Longer-term, given gun demand, I’d like to see it challenge its July high of about $83.57.
Just last month, the company reported 2020 net sales of $568.9 million, and diluted EPS of $5.09. That’s comparable to net sales of $410.5 million, and diluted EPS of $1.82 year over year.
“For the fourth quarter of 2020, net sales were $169.3 million and diluted earnings were $1.78 per share. For the corresponding period in 2019, net sales were $105.1 million and diluted earnings were 46¢ per share,” as reported in the company’s press release.
Vista Outdoor (VSTO)
VSTO is another hot gun stock to get fired up about. Since highlighting it on Jan. 29, as well, the VSTO stock ran from about $29 to $33.28. Now it’s around $30, although I’d like to see it closer to $40.
With regards to earnings for the shooting sports segment, the company had sales of $402 million – up 41% year over year. Gross profits in that segment increased by 120% to $114 million.
In addition, according to Investors’ Business Daily contributor Matthew Galgani, “After sinking for several years starting in 2016, VSTO stock has also rejuvenated its fundamental and technical performance . . . [the company] generated 390% EPS growth in Q4 and analysts expect Vista Outdoor to post a 473% increase in Q1.”
American Outdoor Brands (AOUT)
I also mentioned this gun stock on Jan. 29. At the time, it traded at a low of $18.81. It’s now up to $26.37 after raising guidance, with sales nearly doubling.
Net sales for the quarter came in at $82.6 million, improving 90.7% year over year. Gross margins came in at 45.2% from 44.1%.
Net income came in at $8 million, or 56 cents per diluted share, from a net loss of $147,000, or a penny a share, year over year. Then, the company raised revenue guidance to a new range of $268 million and $272 million.
Ammo Inc. (POWW)
Finally, I also highlighted ammunition stock POWW on Jan. 29.
At the time, it traded at a low of $5.14 to $6.70. Today, the share price is around $6. There’s plenty to like here too on the earnings front. For one, the company just said it expects annual revenue of $120 million for the fiscal year ended March 31, 2022. It also expects to adjusted EBITDA to exceed $20 million. Two, it just saw a 500% increase in sales for its third quarter. In addition, sales for nine months were up 282%. Gross profit margins increased 163% to about 20%.
In short, growth doesn’t appear to be a problem for POWW.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
