On what basis are you making this claim? RGR is at the bottom of its rising trendline established since the end of August of 2013. Both CCI and RSI are bullish. The only way it hits $70 or below is if it breaks this rising trendline. It has held that rising trendline for the past 8 trading days, including this one. That indicates strong support. So, to the contrary, technical analysis is pointing to gains in the next few weeks.
Fundamentals are even better. A reasonable projection of RGR's next earnings (i.e., repeat of the last quarter that had comparable production days) would put RGR's EPS on a TTM basis somewhere at $5.90 per share, giving a forward P/E of 11.86 based upon a $70 share price. If we got as low as $65 per share, that would give a forward P/E of 11.02. This does not even factor in the Mayodan plant, which apparently is far ahead of schedule and is already producing product for sale. Also, RGR's 1.8 million unit backlog of NON-CANCELABLE, repeat, NON-CANCELABLE orders combined with the new orders it is receiving each quarter means RGR has somewhere in the neighborhood of 9 quarters (i.e., over 2 years) before it depletes the backlog even while going at full steam. This is a $100 stock in 2014.
You don't short this stock right now on technicals or fundamentals. The only hope you have is a broader market crash or that a reckless liberal with lots of money to lose starts naked shorting the ever-loving #$%$ out of this stock so that you can ride along before that liberal gets burned. Even then, the liberal may not be able to get the job done. Case in point, today's 1-second 152,000 share sell (i.e., half the average daily volume) at 1:32 p.m. to try and burn through the buy order stack at a daily swing low to momentum ignite the stock lower.
I am trying to understand why you are coming on these boards to take credit for calling a profit-taking, minor correction. If you look at the technical analysis of RGR, it was at the top of its rising channel, sold off to the bottom of its rising channel, found support there and created a doji reversal candle on Friday, and has now started its trek back to the top of its rising channel. In fact, the CCI is now bullish, as is the RSI.
So, taking a short position at the top of the channel to play the descent is fine, and consequently now taking a long position at the bottom of the channel for the ride up is fine. It doesn't make you some stock genius or otherwise show some peril for RGR's incredible-stock story. In fact, you won't find another short entry point until around 82ish pps looking at the technicals and the trendlines for RGR. You could of course place a bet on Tuesday to gamble on what the Fed will do Wednesday, as tapering would affect generally all stocks in a negative way. However, that is better known as gambling rather than investing. And, again, that is bet against stocks generally, not a bet against RGR specifically like the bets on the so-called gun bubble pop. So, the only way you will be proven correct on a longer-term downtrend of RGR is because of tapering, not because of fundamentals.
In sum, there is no larger downtrend reflected in RGR's price action and technicals. You accurately called a short-term correction in a rising channel, but if you were to hold your short beyond Friday of last week you will be scorched in the next week or two and the only thing that would save you would be the Fed announcing a taper on Wednesday (which is not in any way solid stock analysis just a gamble on what's in a central banker's head).
On 12/05/13, RGR held its rising trendline support and is now heading higher. Game on for on an upward. I predict we hit the 80s in a couple weeks or perhaps sooner. A taper decision by the Fed might hurt stocks in general though.
RGR is currently correcting, but that's not a reason to short it unless you are just playing the channels. RGR will probably sell off for the next day or two before hitting support at its rising trendline and then will blitz higher.
The only thing that could derail it is the Fed tapering. But, that will crush all stocks so it is not a reason to specifically short RGR over any other stock.
I'm not calling the end of a "bubble" until a see evidence that it is ending. So far, I see no evidence and you haven't provided any evidence, just a belief that it will end because Republicans will win mid-terms. That logic is flawed because you misunderstand the political dynamic. The federal level is one threat, but the states can pass laws too and they are a threat. Maryland passed a gun control law that spurred massive sales there. The liberal states will continue to spur sales through state-level legislation.
If I see NSSF-adjusted NICS background checks or quarterly reports by RGR indicate a forthcoming substantial loss of demand, than I will re-evaluate at that time and consider winding down the position. But there is no such evidence right now.
jsoheerno, we would take you seriously if your analysis did consist of: "something, somewhere is going to happen to take this stock down; I don't know what, but it will." That's basically pure hope and nonsense. Your thesis I suppose is gun demand will wane. No one disputes that it will normalize from the Sandy Hook bump, but if you look back at my analysis it will take a sustained decrease in demand of significant amount to adversely affect RGR's profits.
The dividend was not cut. It stays at a flat 40% of earnings. Any insider selling is not an issue if it is an automatic sell. The news on Iran is hard to interpret either way; perhaps stability for 6 months followed by war. Debt ceiling discussions won't phase market because everyone knows it will be raised. The only thing you mention that is valid is a QE taper that would be a broader market issue, not specific to RGR.
Yes, it will be promising for the reasons I stated. First, normalized gun demand increases 7% YoY; that's great. Also, another gun control push would just slam the demand higher, and you know that the gun control push is coming at the state level. Quite frankly, it is far too early to tell whether the future is pointing down. I want to hear Q4 earnings first. The decrease in gun sales from last quarter was consistent with seasonal patterns. You can't decide whether demand is decreasing until we hear from Q4.
In summary, do not short this stock unless you want some serious pain. The thesis for shorting the stock is that gun demand will slow down. That thesis is seriously flawed. If you normalize for the Sandy Hook/Gun Control bump, NSSF-adjusted NICS background checks continue to grow at about a clip of 7% per year. This data is a fairly good proxy for gun demand. As Fifer said, any industry with publically-traded stocks would be ecstatic with 7% growth per year.
Your guys' assumptions of $30 and $50 stock assume a massive drop in EPS, or assume a TTM P/E that gets into the range of 4-5 ($30 stock) or 7-8 ($50 stock). Your analysis is even further flawed because, at that point, as Fifer said, he would step in and do share buybacks to return the stock to its historical P/E average. So, show me the analysis of how we get down to $30 or $50, but I don't think you can because it won't happen unless the entire stock market crashes and then you're screwed no matter what stock you own.
Third, let's talk P/E and dividend. TTM EPS is 5.29. That gives a TTM P/E of 14.89 based upon a price of 78.32. It's probably fair to assume that Q4 earnings will be roughly equivalent to Q2 given the work days and margin improvements that aren't going away. That gives Q4 EPS of 1.63. As of next earnings date that gives a TTM EPS of 5.9 and a TTM P/E of 13.27 based upon price of 78.32. Moving to Q1 2014, assume EPS stays roughly the same again because of improved margins that aren't going away and full production. You're looking at another Q1 2014 EPS of 1.63. That gives you a TTM EPS of 6.33 and a TTM P/E of 12.37. Then, you have the new facility in NC that starts running additional product lines, including new products and perhaps including accessories which are extremely high margin and therefore very nicely profitable. Who knows what EPS will be after that, but it will be higher.
Fourth, let's talk dividend. Given the EPS estimates above, the dividend yield will stay north of 3%. Also, keep in mind that by Q1 2014, RGR will have close to enough cash on hand to do a special dividend of $4.50 a share, or a 5.74% dividend at 78.32 share price. Fifer has already said that he will do a special dividend if they get too much cash to do anything productive with. So, that special dividend is coming in 2014. That will hurt if you are a short.
You must be absolutely, incredibly insane to short RGR. Here is why:
First, let's talk sales. RGR currently has about 1.8 million units on backlog. While Fifer does not like to put much stock in the backlog because he says distributors tend to overreact one way or another to market conditions (i.e., too many orders or too few), those sales to distributors are non-cancellable per RGR's policy so that. Therefore, RGR has a guaranteed 1.8 million units in the pipeline. Last quarter, RGR shipped 553,000 units and received 390,400 more orders. That comes to a difference of 162,600 units. So, RGR chewed into its backlog by 162,600. Now, let's assume a rather worst-case scenario for the sake of argument and say that new orders are cut in half due to waning demand, so only 195,200 new orders. That gives a difference of 357,800 reduction in backlog. Even in that worst-case scenario it will take 5 quarters to eliminate RGR's backlog with RGR at full production. After that, Fifer has indicated he would like to increase distributor inventory from ~90,000 units where it is now right now to ~300,000 units. That's 210,000 units per distributor, and count the distributors.
Second, let's talk why the worst-case scenario of reduced orders will not occur. For one thing, Democrats will forever be talking gun control, not just at the federal level but at the state level. For another, the NSSF adjusted NICS background checks still continue to show an increase year-over-year and that does not include CC permit holders. This does not even touch upon RGR's ability to take market share or rollout new products, or expand the types of products it makes or move more into high-margin accessories.
Something crazy called hunting season that starts in October and strangle coincides with the increase in background checks from October - January
Come on Scotty, put it on the tape so I can buy the dip already. You know your short friends need it right about now.
Seriously, this is right about the time he posts his usual hit piece that is entirely wrong in its conclusions. Can he post already? I have some cash I want to put into RGR shares before the next quarter's earnings blowout and before we get a short squeeze.
That's not an accurate analogy. RGR's dividend is determined at a RATE of 40% of the earnings. Therefore, the analogy with a paycheck would be my rate of pay. RGR has not cut its "rate of pay." Therefore, these articles claiming RGR "cut" its dividend would be like me saying that my paycheck was "cut" and is less because I earn $10.00 an hour and I worked 20 hours less this pay period.
Only a liberal would claim his or her paycheck was "cut" because they earned less due to less hours worked although their rate of pay remained the same.