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Sturm, Ruger & Co. Inc. Message Board

  • je.starling je.starling Jun 19, 2014 10:35 PM Flag

    How to Play SWHC Earnings for RGR - The "Slowdown" to "Normalization" We Knew Was Coming

    RGR is going to take a hit from SWHC's forward guidance. There's nothing you can do about it. Fifer knew this was coming as demand "normalized" (and by normalize, we mean 7% CAGR demand growth per year which every other industry would kill for but, because guns are politicized, RGR and SWHC don't get credit for). SWHC is confirming for Wall Street that the "slowdown" (again, the normalization to 7% CAGR that everyone would kill for) is here and coming. Wall Street, as usual, will overreact and swing SWHC and RGR down hard.

    Here are the levels you need to watch:

    ~60.71 pps - 61.8% Fibonacci retracement of the rally from June 12, 2013 to January 17, 2014.
    ~58.50 pps - 38.2% Fibonacci retracement of the rally from February 2011 up to January 17, 2014.
    ~56-57 pps - Bottom ascending trendline from Oct. 2011, touching on June 7, 2012, touching on December 18, 2012, touching on June 12 and 13, 2013.
    ~55.02 and ~54.18 pps - 78.6% and 76.4% Fibonacci retracement of the rally from June 12, 2013 to January 17, 2014.
    ~52 pps - Bottom ascending trendline from February and June 2011.

    I am going to look at 52-55 for a buy point, depending on how the RSI, CCI, and other indicators look. Right now, the daily and weekly chart have a low enough CCI that momentum could get pushed for some sharp momentum declines.

    Some long-term thoughts to keep in mind. First, RGR's Shiller PE (look that up if you don't know what it is, because it's far more important than PE) is ~ 22.2. That right about where RGR's Shiller PE was during the stock market declines of '08 and early '09. So, from a value basis, RGR is going to be way undervalued when it gets hacked over SWHC's guidance. Second, keep in mind RGR Fifer has $25 million in dry powder to stock buyback when Wall Street comes after the stock. Last, keep in mind RGR still has a backlog, is running at full production, and will continue to perform strongly on earnings and revenue.

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    • i am hugely disappointed in RGR and management's failure to grow the PPS. the buyback isn't happening and the bottom continues to fall out. RGR totally underperforming the DJI avg. i bought back in at 65.84 and so have incurred a 9.14% capital loss. by far and away the worst holding in my 24 stock portfolio. nasty.

      altho i agree with the majority of your post this company is simply unattractive to institutional investors and many individual investors have bailed. the yield is decent at 3.61% (mediocre) and the P/E is quite good at 10.7. Forward P/E also good at 8,94 but that is suspect. however, Mr. Wall St doesn't like RGR.

      i can't see any silver lining here. revenue looks to decrease quarter over quarter as demand drops. if you were going to buy a gun, you already have. sales aren't going to increase unless there is a very strong push for anti-gun legislation and that has cooled off.

      and where is the stock buyback at??? now would be the time UNLESS management believes PPS to fall even more before they initiate. That sign doesn't bode well for shareholders.

      this position is on my bubble list. i made a bad move getting back into RGR. i will hold for time being and monitor closely.

      Sentiment: Hold

    • Great post thanks. The put premiums for Oct are juicy for 55 and 52.5 looks like someone expects it down there soon.

56.88-1.21(-2.08%)Jul 2 4:02 PMEDT