The post is broken down into the following order:
- prior trade in Sturm, Ruger & Co. (RGR)
- news that drove me to current research
- personal experience
- stock of choice
Prior trade in Sturm, Ruger & Co. (RGR):
Its no secret that the gun and gun related product trade is in full effect right now with recent news of the shootings that it seems news can’t even keep up with. I recently wrote about a trade opportunity in Sturm, Ruger & Co. (RGR) after it saw selling. My attention was brought to this stock after the Newtown tragedy. Also guns were a momentum long play off political debate and then saw selling. The Newtown school shooting brought even more attention and these stocks saw further selling into where I believe the news overruled the trade. In the post “Getting Long the Gun Trade with Options” I believe the RGR trade was of low risk if you were willing to be long the stock below 35.50 (currently trading at 43.27). You were long the equivalent of around 46 shares (per 1-lot) on a margin requirement of around $450. Right now that trade is showing a gain of $77.50 (+17%) if you were filled at the trade recommendation.
With that aside I read some interesting articles that talk about the demand for ammo and gun supplies now. These articles are titled “Ammo Suppliers Everywhere Are Reporting Shortages From A Huge Surge In Demand” and “Buy the bullet: Rush on ammo sales“. These posts have the following information:
- sold more than 3.5 years worth of magazines in a 72-hour time span
- UT Arms, like many retailers, is sold out of 30-round magazines
- many supplies for the AR-15 are out of stock
- employee of Dick’s Sporting Goods said that “it seems like more people are coming in than ever before” looking for ammunition and other accessories
Those were some snips that I pulled from the articles. Needless to say I believe ammo prices will go up and as a hunter that hurts. Not even talking about rifles I have witnessed the price of ammunition go up for shotguns as well. One thing I buy a lot of is 12-gauge 2 3/4in 6-shot heavy loads. The best prices for these are at Wal-Mart (WMT) as they have not marked up the price much. But when I could buy a box of 20 last year for 11.96, I am now paying 2 dollars (16.7%) higher in just over a year.
With reading the post and seeing the trend of rising ammunition prices I am thinking more hunters might go into reloading their own shells. Even I am thinking of it. I’ve stated the price for shotgun rounds but I have paid as high as $50 dollars for a box (20 rounds) of rifle shells. Now one might say I don’t see why you need to shoot 20 rounds of ammunition at an animal. I agree but also note that hunters are concerned about the zero of their rifle every year (at minimum) and it may take at a minimum of 10 rounds to know if my rifle is hitting where it is supposed to.
Stock of choice:
In looking for “reloading” stocks I turned to The PPT and used the probably under-utilized search function and typed in “reloading”. With this two stocks pulled up, Olin Corp. (OLN) and Alliant Techsystems Inc. (ATK). Of the two I decided to look at ATK due to its prior upside gains and chart structure as OLN has more of range-bound chart. Below is a 10 year weekly logarithmic chart with some trend lines, the 10 & 40 week averages, and volume at price:
Note the relative strength and how it has crossed above its moving average of the lows. Also it is currently against some resistance but I believe it is a buy on a pullback and will take out that resistance making it new support. It is also in a volume pocket to where 70 seems like comfortable target. Now it may see some selling/profit taking as it’s over 40% off its 2012 lows, but the formation of the right shoulder of an inverse head and shoulder would be a buy if it were to trade below 55 or around that level. Below is a zoomed in chart with same parameters: