S&W stock kicking Ruger's butt

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Ohen Cepel

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Just looked at the 2 since I would like to invest in things I know a little bit about.

RGR has been going down for a long time and has a very low rating (3).
SWB is doing rather well, climbing up for a long time and has a rating of (8).

Both seem to be doing well. Smith obviously wasn't affected much by the change of ownership (looked at 10 year chart) or the foolish agreement with clinton.

More trying to figure out why Ruger isn't doing better. I would have thought the small gov't contract they got would have given them a bump at least.

Any idea why Ruger's stock isn't doing that well?

Does anyone know the easiest way to buy either stock directly so it'll be listed in my name? I know it's not as practical but would like to be able to vote on issues and have my say, what little it's worth :)
 
Look into the financial statements of both companies. You will find that Sturm-Ruger has substantial assets and no, or next to no, debt, which for a firearms company is unusual. In addition, Ruger is much more diversified with a wide range of products besides firearms. S&W is doing better then they were with much wiser management, but they have all of their eggs in one basket.
 
Ownership of Ruger stock requires a patient investing style.

Historically (last time I looked) the price bounced around between 7 and 9 dollars (I was surprised at the $3 dollar low you quoted). There's not a whole lot of shares out there to buy (relatively speaking). If the price is down around $3 it means there's been a bunch of selling - Usually that's bad but not always. The family may just be trying to raise cash or something. You'd have to look and see (if Ruger is a Valueline tracked stock you can find out real quick at your local library)

Folks that buy Ruger stock mostly buy it for the dividend the company pays but and this is a big but the way the dividends get paid is way out of norm for most dividend paying companies (which outside of the financial and utilities stocks are still pretty uncommon - though that seems to be changing).

What makes Ruger stock wierd is the way they pay dividends. To make a long story short basically you have to be the owner of record for 3 years to collect a dividend (which is usually quite a healthy number compared to most dividend paying stocks). Once you get past the 3 year mark you collect dividends every year for the declaration date 3 years prior. If there's any other companies that pay dividends like that I'm not aware of them and I've been in the Stock Market as an investor for the better part of the last 30 years.

That said if Ruger is selling for $3 bucks a share and you've got the patience to hold on to 'em, aren't terribly risk averse and the money to buy 5000 or so shares and keep adding to it Ruger stock may be worth a more in depth look. Ruger is a fairly strong company with a decent market share in it's market and a healthy income and balance sheet. IMO it'll be around a long time and as long as they keep paying the healthy dividends they do are a fairly safe investment.

The only down side/risk to owning Ruger Stock is that the last time I looked (it's been awhile) the family still owned a pretty healthy share of the company. This is bad because historicaly eventually family owned companies get sold off by the family and often the new owners don't have a clue how to run their newly acquired business.

NOTE:I'm not hawking Ruger stock. Trading in the market if you don't know what the hell you're doing is always risky. Hell - it's risky if you do know what you're doing. That said - if my personal style wasn't short term speculative but was long term income I wouldn't hesitate to recommend Ruger stock (at least after I found out what caused that $3 low).
 
Ruger cut the dividend last year, from $.20 per share per quarter, to $.10. The share price has dropped roughly in half since then. As far as I recall, I started getting the dividend the quarter after I bought the stock. Maybe because I bought it through Ameritrade instead of directly from Ruger? I only have 10 shares.... ;)

I think the '3' that was mentioned is not the share price, it's a rating out of 10.
52-Week High 12.60 (05/26/04) 52-Week Low 6.41 (04/22/05)
Closed today at 6.77, giving an annual dividend yield of about 5.9%
 
another part of the rgr problem is their debt... they have none which is not really a good thing. debt is cheaper than equity (tax breaks and such).

the fairly new ceo was evidently not the choice the market wanted, which i'm sure has something to do w/ its price of $6-7/sh.

the company cut dividends - never a good thing to do. sends a signal to the market that you're in trouble - whether or not that is true.

the company's dividend policy of $.10/share nets a return that is below what the market aggregates...
 
Thanks for the input all.

The 3 and 8 numbers were ratings out of 10 given by a stock research company.

Smith is still selling for much less than Ruger. Have to talk it over with the wife now :D
 
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