Summary
- Firearms have seen surging demand so far in 2020 with all the uncertainty surround the pandemic and the mass riots.
- Outside of these unusual events, shooting sports grow in popularity at a rapid rate.
- Smith & Wesson is an iconic firearms manufacturer that is very well-positioned to take advantage of these trends.
- Following the spin-off of American Outdoor Brands, the company is a pure-play on firearms and no longer has the auxiliary products.
- The valuation is attractive compared to its peers.
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This has certainly been an interesting year so far. First, we had an unprecedented worldwide economic shutdown in response to a pandemic. Then we get central banks all around the world printing an enormous amount of money to combat the effects of this shutdown, which caused investors to purchase gold, silver, and other assets due to fears of inflation. Finally, shortly following the end of the shutdown, the United States began to see widespread protests and riots in numerous cities throughout the country. In other words, the defining emotion among people this year is fear. This has perhaps unsurprisingly led to a run on weapons and ammunition throughout the United States, with shortages being openly reported. This may create an opportunity for investors. One way that investors can take advantage of this is by purchasing shares of a firearms manufacturer such as Smith & Wesson Brands (NASDAQ:SWBI).
About Smith & Wesson
Smith & Wesson is one of the oldest and most renowned manufacturers of firearms in the United States. The company was founded in 1852 by Horace Smith and Daniel Wesson in order to manufacture a firearm that could fire a fully self-contained cartridge. This is what we know today as a bullet. It was the first American company to manufacture these weapons. It was also the first company to manufacture several other innovative firearms including the revolver, which was a precursor to today's semi-automatic and automatic pistols.
Source: Smith & Wesson Brands
On November 13, 2019, Smith & Wesson Brands announced the spin-off of American Outdoor Brands (NASDAQ:AOUT). Following the spin-off, Smith & Wesson would be a pure-play firearms business while American Outdoor Brands would encompass the other products that the company manufactures that are intended for the outdoor enthusiast. This transaction closed on August 10 so it is now too late to get into the pre-split business. For our purposes though, we want to be in the pure-play firearms company, which continues to trade under the ticker symbol SWBI.
