3 Reasons Why Sturm, Ruger Could Continue to Advancehttp://www.fool.com/investing/general/2013/11/15/3-reasons-why-sturm-ruger-could-continue-to-advanc.aspx Jennifer Johnson
November 15, 2013
As gun sales soared over the past six years, shares of Sturm, Ruger & Co. (NYSE: RGR) have matched the increase, rising more than 800% in the same time period. After reporting earnings and pushing to all-time highs, do these shares still have room to run? Three key takeaways from the company's Q3 conference call could help us answer that question.
CEO Michael Fifer is the right man for the job
Displaying the company's commitment to shareholders, Fifer discussed the potential for another "special dividend," saying:
And later, in response to questions as to why the company has decided against a share-buyback program, Fifer reiterated that the company is open to doing so, but only if the math behind it makes sense: "...we are primarily interested in taking care of the shareholder who's with us today and will be with us tomorrow."
The intangible value of a management team that inspires confidence from shareholders and loyalty from customers can be hard to quantify, but it's what tends to separate the good companies from the great ones.
New products, but still focused on the old
Part of Ruger's response to that was to remind investors how management encourages customers like Cabela's to maintain higher levels of the company's inventory. Ruger sticks to price-discipline to prevent any older inventory from becoming devalued, and thus hurting the final seller's bottom line.
In Fifer's own words: "... a distributor doesn't have to worry about buying from Ruger and then having us devaluing their inventory down the road just to boost sales. We don't do that and they know it and they trust us and that makes our inventory awfully safe."
So a decline in overall firearm sales, while obviously not positive, won't necessarily prevent retail buyers from continuing to maintain Ruger inventory levels.
The other answer for the decline in sales is the rollout of new product lines to generate enthusiasm. A superior product will create its own demand, and Sturm Ruger's newer models are aimed at the type of gun owner who pays a premium for higher quality.
Growth: by acquisition or expansion
Fifer replied, "I would be delighted to acquire t