Today, I’m going to reprise a post from a few weeks ago when I wrote, “Why are gun stocks strong? The first reason, apparently, is that many Americans fear President Barack Obama and his associates will soon make guns more difficult to buy … so they’re buying them now. The second reason is fear of burglary and robbery, and the other crimes that tend to increase during recessionary times.”
I followed that with profiles of the three top-performing stocks in the sector, Sturm, Ruger (RGR) and Smith & Wesson (SWHC), who make guns, and Cabela’s (CAB), who sells them to the public.
In the three weeks since then, all three stocks have done very well. Sturm, Ruger is up 13%, Smith & Wesson is up 10% and Cabela’s is up 18%.
And now Sturm, Ruger has earned a spot in Cabot Top Ten Report, where editor Michael Cintolo wrote, “We like the way after-tax profit margins have expanded from 2.8% to 9.8% over the past three quarters. We like analysts’ estimates that earnings will grow 80% in 2009 (almost certainly conservative). And we like the fact that the stock’s market capitalization just $226 million, or 1.24 times annual revenues … a good value if the growth can continue. But what we like most of all about RGR is that very-high volume blast-off back in early February.”
As I mentioned in my previous recommendation, buying low-priced stocks–none of these have reached the teens yet–can be tricky. It’s important to buy right and be vigilant, because losses can multiply quickly when these stocks fail. For the best advice, I recommend a subscription to Cabot Top Ten Report, which will keep you updated on Mike’s recommendation in every weekly issue.