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Barron's writes what Fooldom Knows, the Consumer is Buying Guns and Ammo; Faber and Rogers Opine

Recs

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March 01, 2009 – Comments (11) | RELATED TICKERS: SWHC , OLN , RGR

A prudent man seeth the evil, and hideth himself: but the simple pass on, and suffer for it.  

Proverbs 27:12 

I have written on the guns and ammo craze several times. My last post: Long Smith & Wesson Holding (SWHC) on February 17, 2009. Had a good 22 RECs and 25 comments

From my post:

Anyone, who has tried to buy ammo lately, or been to a gun show knows the "consumer is not dead".  I think the guns, gold, silver, and ammo story "has legs". Gold and silver are up 300% since 2001, but SWHC has fallen from $21 to $2.50. I do not think SWHC is a great company or at a good PE. But I think the story will work and there are not many publically traded gun and ammo makers left.

I guess "smart money" is following Fooldom?

The #3 read story in Barron's today:

SATURDAY, FEBRUARY 28, 2009

Breathtaking

By MICHAEL SANTOLI
Make-or-break time.THE STAY-AT-HOME HOBBYIST speculator crowd has been manically betting that societal unrest will have us all arming ourselves. The publicly traded handgun makers have had their stocks driven skyward on searing trading volumes.

Smith & Wesson Holding (SWHC) and Sturm Ruger (RGR) are the main beneficiaries, each up more than 50% in the last seven trading days, in the case of Smith & Wesson on share volume last week that ran at four to five times the daily average. These moves won the stocks' places in various momentum-screening newsletter services. And at least one major online broker was restricting purchases of Smith & Wesson based on the speculative nature of the price and volume surges, and other possible factors.

Yes, Sturm Ruger reported good earnings and increased firearms demand last week. And there has been a surge in requests for handgun background checks. This has blossomed into a breathless passed-along online story that tough times are driving people to buy lethal weapons as a precaution. Yet isn't it a bit more likely that widespread expectation of firmer gun-control laws under the new administration has simply dragged demand forward?

In any case, these non-great businesses are caught up in a mini-mania. Are those the sorts of moves a shrewd investor would rather chase, or fight?

==================================

Let me tell you again, some people are going to get very, very wealthy and powerful in this downturn. There are going to be opportunities, as the panic continues and spreads.

I am still long RGR and SWHC. (I did sell 2/3 my SWHC at $4. I will be re-buying SWHC) I think every man, women and child will be trained in firearms before Obama leaves office. Just wait, the panic into guns will not subside, for years.... 

Also, I think most families will buy several guns.

Again, "gun nuts" can help me here:

22 - for hunting birds, squirrels

assualt rifles - AK-47, AR-15 for defense and big game hunting

shotgun- civil defense and hunting

revolver - simple for the wife and kids

pistol - 9mm, 45s - multiple rounds for defense, commute to work, protection at work etc...

So I think most Americans will be buying Gunssssss, not A gun. Guns-s-s-s-s

Again, do not trust me, go try and buy an AR-15 or some 5.56 or 9mm rounds. Did I mention, that unlike other industries, ammo is selling at a premium. There is NO deflation in ammo prices.

Until the government bans or restricts gun ownership, I like RGR and SWHC.  

Also if/when the government does ban guns, like famous A Team Memeber and gun owner, Mr T says "I pity the Fool", who does not have one. Mr T also liked Gold, as I recall.   

Fools and gun nuts, feel free to help me here.

FYI - Some of My other Gun related posts:

The New Paranoia: Hedge-Funders Are Bullish on Gold, Guns, and Inflatable Lifeboats

January 15, 2009

As if Things Weren't Bad Enough, Russian Professor Predicts End of U.S.

December 29, 2008

A More Bearish View: Legitimacy Dwindles

December 23, 2008

FYI -  Related

Faber: "Buy a Farm" | Rogers: "Unrest in the United States"

Marc Faber says:

The best bet for investors may be to buy a farm and escape from the cities, as a prolonged recession could lead to war, as the Great Depression did. If the global economy doesn’t recover, usually people go to war.

Jim Rogers says:

I expect to see social unrest, civil unrest in the United States a couple of years from now. Yes its changing the entire situation in the United States, the US is the largest debtor in the history of the world. There is a dramatic change taking place.

The world's century is moving from the west to the east, to Asia and many people have not figured this out yet.

Yes, you are going to see a lot of turmoil in the United States in the next 3, 4, 5 years.

Faber and Rogers join many other experts warning of crash-induced unrest.

11 Comments – Post Your Own

#1) On March 01, 2009 at 12:27 PM, abitare (90.51) wrote:

Another Post on this subject, worth a read, Google: abitare Lessons from Argentina's Economic Collapse.I posted it on Nov 02, 2008

From the story:

You guys have most stuff covered, but there's some stuff I'd like to share:

1) Don't invest all your money in your country. Don't put all your eggs in the same basket, just in case economy goes to hell. Invest in a country in Europe, in Australia, whatever, I don't know, but not in the same place. I did this, but most people didn't and got screwed.

2) Keep cash. Both dollars and Euros. I know some of you just don't like the European money, but it's the only way you have to cover most bases. Here the national paper money was worth 1/3 from one day to another.

3) If you have land, have some animals. Even a few chickens and rabbits can make a huge difference and will complement your staple food.

4) Buy guns and ammo. Not 20, but a couple of fighting guns, 1 or 2 Mausers and 2 or 3 handguns. You know the kind. Get lots of 22 ammo.

5) Try to get 2 or 3 similar guns, like 2 or 3 AR, Fals, or SKS. This way you can use the same ammo and if 2 guns brake you may be able to fix 1. For example, If I were you, Id buy 3 or 4 SKS and 3000 rounds of ammo. If your SKS brakes, you have a spare gun that you already know how it works and are used to.

6) Spare parts are ok, but make sure you know how to replace them, a gunsmith may not be available. If not, get a similar gun as back up.

7) Don't trust the media. If you watch the news here, reporters say everything is ok, everything is fine. But then you talk to your neighbor and it turns out Mr. X got shot yesterday, the nice girl on the next block got kidnapped and raped, and today the boy next door was also kidnapped. This is the kind of conversations I have in my neighborhood, I'm not kidding.

8) Keep 6 months- a year worth of food stored if you can and have a well or at least a good supply of bottled water stored as well a 2 water purifier and a good supply of filters for them. The water network works but it's not safe. Some time ago an entire town got sick because of the contaminated tap water and lots of people died.

9) B-proof vest. I'd sell my left testicle for one these days. I never believed I would ever need one and now here I am. Get one of those that can go under the regular clothes.

10) Keep your passport and cash ready. If you can afford it, the best thing to do in such a country is getting the hell out of it! Maybe you have family somewhere else, keep in touch just in case. I did with my family in Spain and I going there as soon as I can.

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#2) On March 01, 2009 at 2:17 PM, awallejr (79.58) wrote:

Just stop it already with the "world is coming to an end" nonsense.  It isn't.  And while millions in this country lost their jobs,  the vast majority have not. The utilities are still on.  The water is still running. There is plenty of affordable food in the stores.

You want to go run to Spain, well bye bye, don't let the door hit you on the way out. As for me, I wouldn't leave the US for any other Country. 

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#3) On March 01, 2009 at 2:29 PM, ikkyu2 (99.24) wrote:

Suddenly seeing "searing trading volumes" is not a sign of prosperity in the underlying business.  It is a sign of hedge fund interest in playing a pump-and-dump with a small cap stock.  Watch your back.

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#4) On March 01, 2009 at 3:32 PM, abitare (90.51) wrote:

ALCON,

Thanks for the replies.

CORRECTION:

revolver - simple for the wife and kids

Should read:

revolver - simple to use, clean, fire, lighter to carry...good for the wife and MATRUE teenagers + to learn.

awallejr,

If I thought the world was coming to an end, would I be buying a stock, in this market? You are missing the point. There are going to be opportunities, and I just found one. 50% up in a week, not bad?

Read my previous post on Russia, I do not think the "world is coming to an end". A contraction and a reduction in the standard of living, with higher unemployment etc...

IMO, it is simple, we had a credit expansion, now we are having a credit contraction and the bankers, FED and DC are taking the opportunity to make a power grab.

I am not going anywhere.

 ikkyu2,

The fact that this Barron's article "appeared" after a 50% run up, is not lost on this Fool. I agree, I sold 2/3 of SWHC at $4, I have a smaller position in RGR. Take a look at the activity prior to Options expiration in these two.

"hedge fund interest in playing a pump-and-dump with a small cap stock.  Watch your back."

Agree, Good call. I hope these guys run SWHC to $20 again, before they unload it to $2.00 again.

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#5) On March 01, 2009 at 5:22 PM, abitare (90.51) wrote:

I should state again, I do not like guns. I am not a "gun nut". 

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#6) On March 01, 2009 at 8:05 PM, abitare (90.51) wrote:

FYI - and so it begins:

Obama to Seek New Assault Weapons Ban

Previous Ban Expired in 2004 During the Bush Administration
By JASON RYAN
WASHINGTON, Feb. 25, 2009 

The Obama administration will seek to reinstate the assault weapons ban that expired in 2004 during the Bush administration, Attorney General Eric Holder said today.

The rest is here:

http://abcnews.go.com/Politics/story?id=6960824&page=1 

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#7) On March 01, 2009 at 9:15 PM, Harold71 (22.27) wrote:

Wow.  Incredible vertical moves by both stocks.  I saw your post on SWHC, and like most things you discuss, I appreciated the content but couldn't bring myself to speculate on the stock.  We are in an era of reduced speculation/risk-taking in general, but it is quite exciting that a few industries are having absolute boom times amidst general economic malaise.

You have really been quite good at trading the waves of this economic transformation.  Personally I was much better as a long-term investor than I have been as a bear market trader.  I should just trade with you, but I've always had a tough time taking advice, from anybody! :)

I guess I should have known Ruger was doing well.

http://www.bigskyguns.com/Military_Style_Rifles-Ruger-.html

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#8) On March 01, 2009 at 10:02 PM, abitare (90.51) wrote:

 Harold71,

I am waiting to get more money back into SWHC. I am real happy with the move it made. I usually put money, where my Top Picks $ is.

I put money in stocks that move way against me on my CAP picks. So it looks like my Top Picks are getting crushed, I am usually putting money in the ones that move to an extremes against my CAPS calls. There are likely better traders here in Fooldom. 

I will be looking at some ultra shorts this week, the market appears to be heading lower.

I am short WFC, KGC,

Long RGR, SWHC

50% cash. 

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#9) On March 01, 2009 at 10:47 PM, mattlohr (< 20) wrote:

A couple of years ago I bought 1000-round cases of Russian-made AK-47 ammunition (7.62x39mm) for $169 each. That price already was inflated because of the Iraq war, commodity prices (e.g. copper), and hoarding. Today that same case, if you can find it, will cost at least $289.

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#10) On March 06, 2009 at 6:08 PM, RonChapmanJr (60.09) wrote:

Get Rambo's bow and arrow.  You won't have to worry about running out of ammo and it is silent.  The learning curve is fairly high, but it is a very nice weapon for the trained user.

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#11) On March 06, 2009 at 6:14 PM, RonChapmanJr (60.09) wrote:

Also, the arrows can pierce a bullet-proof vest should that be necessary.

Civil unrest is coming.

http://www.survival-information.com

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