Author Topic: Firearms - RGR and AOBC  (Read 4950 times)

DooDiligence

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Re: Firearms - RGR and AOBC
« Reply #20 on: February 17, 2017, 06:43:14 AM »
All statements & figures (rounded) are from the RGR 2015 10K unless otherwise stated.

Actual firearms are their primary product with over 90% of manufacturing being done in the USA as well as 95% of revenues.

Uses investment casting & metal injection molding (MIM) & could improve margins & response times with the introduction of CAD & CNC.

No union employees & performance based compensation accounts for at least 15% of wages which allows for quick adjustments in payroll in the event of slow downs (10% of labor is temp.)

Transferred defined benefit pension to 401K in 2014 with a $40.9m income charge & $7.5m cash outlay to fully fund the new program with no future obligation other than discretionary matching which they've been consistently doing at around $4m to $5m per year since 2014.

Sales are through distributors with 4 accounting for the majority of sales (Davidson's 18%, Lipsey's, 17%, Sports South 13% & Jerry's/Ellett Bros 12%) & management believes that the loss of any distributor would not affect long term sales (maybe a slight short term decrease as a new distributor picks up the business.)

Bad receivables & advertising expenses are minimal.

R & D has been less than 1% of revenues for quite some time (they expense instead of capitalizing.)

Properties include a total of 915,000 sq ft (most of which is manufacturing & warehousing) with 275,000 leased & the rest owned (no major lease obligations or purchase agreements.)

They use LIFO with around a $43.5m reserve (Q3 2016 10Q) & I admit to not fully understanding the implications of LIFO over FIFO (other than it seems like it could be used to game EPS.)

Is LIFO just a numbers game or do they actually have $43.5m worth of old guns laying around in cosmoline?

The company is very agile with CAPEX as the business environment changes.

They accelerated depreciation slightly in 2013 by changing the useful life of machinery & equipment from 10 years to 7.

The company uses sell through estimates & inventory levels from distributors to plan production levels & has no access to retailer figures.

They also monitor units sold to distributors vs NICS background checks (adjusted for renewals) to anticipate production needs (I find the corrolaries a bit lumpy & would appreciate if anyone would look at this & make better sense of it than I can.)

They appear to be very disciplined with buybacks & the dividend varies as a % of earnings from 20% to 60% with an average 49% payout.

Risks are obvious & include potential changes to the Protection of Lawful Commerce in Arms Act, which management has stated could have material effects on the companies ability to operate.

Product liability has been minimal & contingent liabilities are recorded & charged to COGS as incurred/anticipated.

The "Investment Community Communications Policy" states that they won't meet individually with investors or analysts & won't issue guidance (I kind of like this...)

I don't own a gun & have no desire to either but I'm not going to steer away from what I believe to be a fact (guns are not going away in America.) (I am however, contemplating the purchase of a samuri sword, pike & compound bow to deal with the potential of a Zombie apocalypse )

We've had an assasination attempt on a Republican president with major injuries & deaths; horrendous shootings at our nations schools, theatre's, etc. & still, politicians & the public continue to leave gun ownership largely untouched (Waco?  hello...)

Alcohol, tobacco & firearms (and Rick's) are here to stay albeit with varying regulatory changes which will affect them all & cannot be ignored or anticipated accurately; but I can't just refuse to invest in one or all strictly for moral or ethical reasons.

There are a ton of gaps in what I've written here (mostly the future regulatory / statutory implications) & any comments would be welcome (I bought a third of what I'd like to own so someone talk me out of buying any more...)

I won't attempt to hang a valuation on it (I kind of already did with a purchase at $49.80 but I'm basing it on historical PE, PB, PFCF, PS & my own GIGO discounted FCF using a 12% discount & 6% 1-5 years, 8% 6-10 & 8% 11-15 years growth with a 4% terminal & no tangible added.)

Earnings call coming up 22 February.
« Last Edit: February 17, 2017, 06:49:03 AM by DooDiligence »
abc | abev | aapl | bbh | cri | ew | esrx  | ffxdf | nvo | rgr | vde

crap I hang on to as a caution against repetition (OGX & VALE) both very small positions

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rkbabang

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Re: Firearms - RGR and AOBC
« Reply #21 on: February 17, 2017, 07:12:30 AM »
Here's a good chart to look at: https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

You can see how low firearms sales were during the Bush presidency compared with Obama.  There was a small uptick right after 9/11/01 but then they went right back down.  My biggest fear as far as investing in RGR goes is that sales will drop more and more with Trump in the whitehouse and the Republicans controlling congress.  Redo your calculations with a negative 10-20% growth rate for the next 2 years and a flat growth rate for the 6 years after that, which I think is the worst case.  If this happens that may be a good time to pickup some RGR shares.  But on the other hand RGR is already way below its high, so some of these expectations might already be baked into the stock price.   For me the possible negatives outway the cheap looking price at the moment. 

Then again Trump is the master of uncertainty and with uncertainty comes fear.  Also the disdain for him has caused public violence to make the news. Uncertain times are probably good for firearms sales, so maybe sales won't drop off.

DooDiligence

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Re: Firearms - RGR and AOBC
« Reply #22 on: February 17, 2017, 07:18:12 AM »
Here's a good chart to look at: https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

You can see how low firearms sales were during the Bush presidency compared with Obama.  There was a small uptick right after 9/11/01 but then they went right back down.  My biggest fear as far as investing in RGR goes is that sales will drop more and more with Trump in the whitehouse and the Republicans controlling congress.  Redo your calculations with a negative 10-20% growth rate for the next 2 years and a flat growth rate for the 6 years after that, which I think is the worst case.  If this happens that may be a good time to pickup some RGR shares.  But on the other hand RGR is already way below its high, so some of these expectations might already be baked into the stock price.   For me the possible negatives outway the cheap looking price at the moment. 

Then again Trump is the master of uncertainty and with uncertainty comes fear.  Also the disdain for him has caused public violence to make the news. Uncertain times are probably good for firearms sales, so maybe sales won't drop off.

That gives a value under $20 & if that happened, I'd load up.

That said; if it drops to the low to mid $40's I'll add more (I'm also shopping for a sword, pike & bow right now as the Zombie apocalypse seems imminent...)
« Last Edit: February 17, 2017, 07:20:07 AM by DooDiligence »
abc | abev | aapl | bbh | cri | ew | esrx  | ffxdf | nvo | rgr | vde

crap I hang on to as a caution against repetition (OGX & VALE) both very small positions

-----

https://twitter.com/tunawish

rkbabang

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Re: Firearms - RGR and AOBC
« Reply #23 on: February 17, 2017, 07:52:04 AM »
Here's a good chart to look at: https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

You can see how low firearms sales were during the Bush presidency compared with Obama.  There was a small uptick right after 9/11/01 but then they went right back down.  My biggest fear as far as investing in RGR goes is that sales will drop more and more with Trump in the whitehouse and the Republicans controlling congress.  Redo your calculations with a negative 10-20% growth rate for the next 2 years and a flat growth rate for the 6 years after that, which I think is the worst case.  If this happens that may be a good time to pickup some RGR shares.  But on the other hand RGR is already way below its high, so some of these expectations might already be baked into the stock price.   For me the possible negatives outway the cheap looking price at the moment. 

Then again Trump is the master of uncertainty and with uncertainty comes fear.  Also the disdain for him has caused public violence to make the news. Uncertain times are probably good for firearms sales, so maybe sales won't drop off.

That gives a value under $20 & if that happened, I'd load up.

That said; if it drops to the low to mid $40's I'll add more (I'm also shopping for a sword, pike & bow right now as the Zombie apocalypse seems imminent...)

Somewhere between $20 to $40 I'd be loading up as well.

I know you like to fight up close and personal and have your heart set on a sword, pike & bow, but you should really consider this loaded with zombie rounds.

DooDiligence

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Re: Firearms - RGR and AOBC
« Reply #24 on: February 17, 2017, 08:13:15 AM »
Here's a good chart to look at: https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

You can see how low firearms sales were during the Bush presidency compared with Obama.  There was a small uptick right after 9/11/01 but then they went right back down.  My biggest fear as far as investing in RGR goes is that sales will drop more and more with Trump in the whitehouse and the Republicans controlling congress.  Redo your calculations with a negative 10-20% growth rate for the next 2 years and a flat growth rate for the 6 years after that, which I think is the worst case.  If this happens that may be a good time to pickup some RGR shares.  But on the other hand RGR is already way below its high, so some of these expectations might already be baked into the stock price.   For me the possible negatives outway the cheap looking price at the moment. 

Then again Trump is the master of uncertainty and with uncertainty comes fear.  Also the disdain for him has caused public violence to make the news. Uncertain times are probably good for firearms sales, so maybe sales won't drop off.

That gives a value under $20 & if that happened, I'd load up.

That said; if it drops to the low to mid $40's I'll add more (I'm also shopping for a sword, pike & bow right now as the Zombie apocalypse seems imminent...)

Somewhere between $20 to $40 I'd be loading up as well.

I know you like to fight up close and personal and have your heart set on a sword, pike & bow, but you should really consider this loaded with zombie rounds.

Everyone knows that Zombies are attracted to loud noises.

Guns would be needed for protection against live humans.

I think that forming 2 squads with one aimed at Zombies (and hunting for food) & one for protection against hostile humans would be the way to go (I'd keep a sidearm as a backup; probably a totally reliable Blackhawk...)

🗡 🔱 🏹 🎣
abc | abev | aapl | bbh | cri | ew | esrx  | ffxdf | nvo | rgr | vde

crap I hang on to as a caution against repetition (OGX & VALE) both very small positions

-----

https://twitter.com/tunawish

rkbabang

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Re: Firearms - RGR and AOBC
« Reply #25 on: February 17, 2017, 08:50:19 AM »
Here's a good chart to look at: https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

You can see how low firearms sales were during the Bush presidency compared with Obama.  There was a small uptick right after 9/11/01 but then they went right back down.  My biggest fear as far as investing in RGR goes is that sales will drop more and more with Trump in the whitehouse and the Republicans controlling congress.  Redo your calculations with a negative 10-20% growth rate for the next 2 years and a flat growth rate for the 6 years after that, which I think is the worst case.  If this happens that may be a good time to pickup some RGR shares.  But on the other hand RGR is already way below its high, so some of these expectations might already be baked into the stock price.   For me the possible negatives outway the cheap looking price at the moment. 

Then again Trump is the master of uncertainty and with uncertainty comes fear.  Also the disdain for him has caused public violence to make the news. Uncertain times are probably good for firearms sales, so maybe sales won't drop off.

That gives a value under $20 & if that happened, I'd load up.

That said; if it drops to the low to mid $40's I'll add more (I'm also shopping for a sword, pike & bow right now as the Zombie apocalypse seems imminent...)

Somewhere between $20 to $40 I'd be loading up as well.

I know you like to fight up close and personal and have your heart set on a sword, pike & bow, but you should really consider this loaded with zombie rounds.

Everyone knows that Zombies are attracted to loud noises.

Guns would be needed for protection against live humans.

I think that forming 2 squads with one aimed at Zombies (and hunting for food) & one for protection against hostile humans would be the way to go (I'd keep a sidearm as a backup; probably a totally reliable Blackhawk...)

🗡 🔱 🏹 🎣

The loud noise problem is real and one that the Republicans in congress are trying to solve.
http://lawofficer.com/tactics-weapons/handguns/bill-to-legalize-silencers-introduced-in-congress/

Hopefully this will pass and Trump will sign it. 

DooDiligence

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Re: Firearms - RGR and AOBC
« Reply #26 on: February 17, 2017, 09:10:05 AM »
Here's a good chart to look at: https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

You can see how low firearms sales were during the Bush presidency compared with Obama.  There was a small uptick right after 9/11/01 but then they went right back down.  My biggest fear as far as investing in RGR goes is that sales will drop more and more with Trump in the whitehouse and the Republicans controlling congress.  Redo your calculations with a negative 10-20% growth rate for the next 2 years and a flat growth rate for the 6 years after that, which I think is the worst case.  If this happens that may be a good time to pickup some RGR shares.  But on the other hand RGR is already way below its high, so some of these expectations might already be baked into the stock price.   For me the possible negatives outway the cheap looking price at the moment. 

Then again Trump is the master of uncertainty and with uncertainty comes fear.  Also the disdain for him has caused public violence to make the news. Uncertain times are probably good for firearms sales, so maybe sales won't drop off.

That gives a value under $20 & if that happened, I'd load up.

That said; if it drops to the low to mid $40's I'll add more (I'm also shopping for a sword, pike & bow right now as the Zombie apocalypse seems imminent...)

Somewhere between $20 to $40 I'd be loading up as well.

I know you like to fight up close and personal and have your heart set on a sword, pike & bow, but you should really consider this loaded with zombie rounds.

Everyone knows that Zombies are attracted to loud noises.

Guns would be needed for protection against live humans.

I think that forming 2 squads with one aimed at Zombies (and hunting for food) & one for protection against hostile humans would be the way to go (I'd keep a sidearm as a backup; probably a totally reliable Blackhawk...)

🗡 🔱 🏹 🎣

The loud noise problem is real and one that the Republicans in congress are trying to solve.
http://lawofficer.com/tactics-weapons/handguns/bill-to-legalize-silencers-introduced-in-congress/

Hopefully this will pass and Trump will sign it.

Might make it easier for people to sleep in Chicago without all that noise...
abc | abev | aapl | bbh | cri | ew | esrx  | ffxdf | nvo | rgr | vde

crap I hang on to as a caution against repetition (OGX & VALE) both very small positions

-----

https://twitter.com/tunawish

rkbabang

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Re: Firearms - RGR and AOBC
« Reply #27 on: February 17, 2017, 09:12:36 AM »
Here's a good chart to look at: https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view

You can see how low firearms sales were during the Bush presidency compared with Obama.  There was a small uptick right after 9/11/01 but then they went right back down.  My biggest fear as far as investing in RGR goes is that sales will drop more and more with Trump in the whitehouse and the Republicans controlling congress.  Redo your calculations with a negative 10-20% growth rate for the next 2 years and a flat growth rate for the 6 years after that, which I think is the worst case.  If this happens that may be a good time to pickup some RGR shares.  But on the other hand RGR is already way below its high, so some of these expectations might already be baked into the stock price.   For me the possible negatives outway the cheap looking price at the moment. 

Then again Trump is the master of uncertainty and with uncertainty comes fear.  Also the disdain for him has caused public violence to make the news. Uncertain times are probably good for firearms sales, so maybe sales won't drop off.

That gives a value under $20 & if that happened, I'd load up.

That said; if it drops to the low to mid $40's I'll add more (I'm also shopping for a sword, pike & bow right now as the Zombie apocalypse seems imminent...)

Somewhere between $20 to $40 I'd be loading up as well.

I know you like to fight up close and personal and have your heart set on a sword, pike & bow, but you should really consider this loaded with zombie rounds.

Everyone knows that Zombies are attracted to loud noises.

Guns would be needed for protection against live humans.

I think that forming 2 squads with one aimed at Zombies (and hunting for food) & one for protection against hostile humans would be the way to go (I'd keep a sidearm as a backup; probably a totally reliable Blackhawk...)

🗡 🔱 🏹 🎣

The loud noise problem is real and one that the Republicans in congress are trying to solve.
http://lawofficer.com/tactics-weapons/handguns/bill-to-legalize-silencers-introduced-in-congress/

Hopefully this will pass and Trump will sign it.

Might make it easier for people to sleep in Chicago without all that noise...

Good point. It makes the guns a lot longer though.  Gang-bangers are going to need baggier pants.

DooDiligence

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Re: Firearms - RGR and AOBC
« Reply #28 on: February 17, 2017, 09:36:16 AM »
Also would gang banger still apply (maybe gang poofter...)
abc | abev | aapl | bbh | cri | ew | esrx  | ffxdf | nvo | rgr | vde

crap I hang on to as a caution against repetition (OGX & VALE) both very small positions

-----

https://twitter.com/tunawish

no_free_lunch

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Re: Firearms - RGR and AOBC
« Reply #29 on: February 17, 2017, 10:13:41 AM »
Can't believe I am referencing them but there was a good vice video on gun ownership in America the other day.  I can't seem to find the link and their site is down, perhaps I will add it later.

The key take aways I got:

- They break out gun ownership by ethnicity and it is roughly 40% of whites, 20% african american, 20% latinos families own a firearm.  So maybe not a completely tapped out market.
- Since election, vice claims, gun clubs for minorities have seen surges in membership.

I am interested in this industry and will be investigating.  Some ethical issues here for sure, I will have to think about that.