dimanche 5 juin 2016

Gun stocks

Is it any serious investor out there that likes gun stocks?

Taking a look at www.dataroma.com, it looks like not any superinvestor is interested in the two most known gun stocks: Ruger (RGR) and Smith and Wesson (SWHC).

I've followed Ruger for maybe 5 years. I've always liked the stock on paper. The numbers are great.

But this stock is very very very linked to politics and shooting in schools. So, it's a very special stock and it seems like serious investors don't like when their stocks are too related to scandals and killings and politics. I understand that. It's not stupid at all.

Yeah, Lassonde will probably sell more and more juice, year after year. Dollarama will probably sell more and more cheap articles year after year. And what about Ruger and Smith and Wesson? Will they sell more and more guns?

Well, they don't sell something that is bought by us canadians. But in the States, it's in the constitution: everybody has the right to own guns. And many people own guns. So, it's hard to understand for a canadian, but the gun industry is linked to a right and almost a responsability for many americans.

I repeat: on paper, SWHC and RGR look great. Take a look at those numbers:

Their ROE is very high (average last 5 years = 42 for RGR and 35 for SWHC)
Their forward PE is reasonable: RGR = 17 and SWHC = 13
RGR has virtually no debt and SWHC has a decent debt
Their EPS growth is high (annual growth last 5 years = 17% for RGR and 20% for SWHC)
Their buyback is great (SWHC bought back about 16% of the float over the last 3 years)

The only problem on paper is that their results are uneven from quarter to quarter and from year to year.

But, I don't see how any of these two could go bankrupt. They're very well managed and there's not that much of competition in that field.

But fuck, this industry is so crazy. I don't know if I'll ever invest in a stock like that. But let's be clear, if a business sold any harmless shit with these numbers, I'd be a shareholder without any hesitation.

4 commentaires:

  1. Social investing is a good topic. You can make lots of money with guns,tobacco and casino stocks. But for me I prefer to are a good return with Dollarama and Lassonde and be able to sleep at night if my uncle dies of lung cancer or when I read about the exit school shooting in the US. There are so many good stock in the market that I don't see the need to go there but agree if you have a pure evil or don't care type mind like Kevin O Reilly would make lots of money with those. Partially because most don't want to own it keep valuation low so by definition it gives them high return

  2. Gun stocks aren't my things although I am ok with tobacco companies. Even though the stocks may produce more favorable returns but I can't explain to my family that I made money by investing in them then I won't.

  3. Fun subject.
    The beauty of this blog is I think the majority of the readers are educated minds. I think this prevents the posts from turning into the youtube comment section and unlike youtube, I have yet to see anyone drop a racial bomb on anyone in this forum which is nice to see. I think it's also the reason there's not a debate on people trying to justify why they should or should not invest in a vice stock. Educated minds can appreciate both sides of the argument and can understand the motives and associated decisions of individual investors. I think the only personal position I take in this subject is I’ve started lumping some – not all – pharmaceutical companies in with the alcohol/tobacco/firearm stocks. If a pharmaceutical’s business model is to purchase a drug individuals need to sustain their health, and increase the price of said drug 500-1000%, one can certainly have a debate on the ethics of the matter.