Freedom Group: Right-wing gun nuts get ready
Today's Financial News - Posted October 22, 2009
After a big flop with Chrysler, Cerberus finally has a winner on its hands. Even better, right-wing gun nuts have another shot at profits. I can’t wait.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): I live in a neighborhood where guns are common. I like it that way.
Last night, the lady of the house and I decided to enjoy what may be one of the last warm evenings of the year on the East Coast by taking a short hike along the river that flows just two miles from our front door.
While meandering along the water and dodging groundhog holes, we heard the telltale report of high-powered rifle. I turned toward the sound of the shot fully expecting to see a hunter aiming for a follow-up shot.
Instead, I saw a family (at least three generations worth) sitting around a shooting bench, sighting in the new rifle. Best of all, there was only one man present. The shooter was a young girl and her grandma held the extra shells as gently and firmly as fine china.
Why in the world am I sharing this mundane story of rural living? Good question.
It’s to prove that while the city slickers and flatlanders down in D.C. may not be fans of the firearm industry, those of us that manage to somehow squeak out a life that resembles that classic American way still love the sheen of a well-polished hardwood stock and a freshly blued barrel.
The smell of gunpowder
In fact, the gun industry is wrong to fear Obama’s presidency. Since McCain conceded to the man almost a year ago, gun sales have been through the roof.
Right now, investors that want to cash in on the gun-buying craze have just two choices (outside unloading their personal arsenal), Smith & Wesson (NASDAQ:SWHC) and Sturm Ruger (NYSE:RGR).
Shareholders in both companies managed to find full immunity from the current economic downspin. Shares of Smith & Wesson are up nearly 200% from this time last year (400% peak to trough) and Sturm Ruger’s share price has surged 89% (250% from the bottom to the top).
Now we are about to get a third choice and I could not be more excited.
As a proud new owner of a Remington 887 Nitro Mag that missed its first shot last week (my fault, not the gun’s), I am happy to hear the beleaguered private-equity firm Cerberus is about to take the company public.
Remington is just one part of Cerberus’ Freedom Group, an umbrella that contains big brands like Marlin (I traded a Marlin lever action for my 887), Remington, Bushmaster, Parker and Nesika.
All combined, Freedom sold 1.1 million shotguns and rifles and two billion rounds of ammunition during its fiscal 2009. The sales added up to $427.3 million, equating to profits of $32.8 million.
In 2008, Ruger recorded $181 million in sales and $8.7 million in profits while Smith & Wesson booked a top-line of $102 million and income of $12.6 million.
Obviously, Freedom is going to give investors a strong choice.
Cerberus, which currently owns 94 % of the company is looking to get $200 million during the upcoming IPO. Since this news is fresh, we have few details on the exact proportions or the date of the offering, but rest assured this is going to be a hot one.
You will be hearing more.
Investors have been waiting to get their hands on these names for quite some time. After a mega-flop with Chrysler, Cerberus has a strong winner on its hands this time.
Next Article: Rocky Brands: If the boot fits, wear it
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