|Written by GSCR Staff|
|Monday, 22 April 2013 08:14|
Coming up for topics and stocks for our daily Market Monitor can present challenges sometimes, particularly on Monday mornings after a huge sell-off from the prior week. Obviously, the big news story last week was the Boston Marathon bombing, and thankfully, the suspects being brought to justice. You may not have paid attention to the fact that President Obama’s gun legislation was halted in the Senate, so it is back to square one for gun control advocates. Ask yourself, as I did, what stock in our small cap space tends to benefit most from these events?
The answer is Smith and Wesson Holding Corporation (NASDAQ – SWHC - $8.63). We have highlighted this stock before but we think the recent events prompt reminding investors once again.
The failed gun legislation should clear any sense on the Street that SWHC will be hindered in sales by the government in the future. The events in Boston, particularly the chase and stand-offs in Watertown, will more than likely heighten our nation’s ‘vigilance’ at least in the short-term. It is certainly no laughing matter, but the idea of having a madman and suspected terrorist running around my quiet suburban town makes me want to go out and buy a gun.
Smith and Wesson continues to expand and improve its product line and customer base by selling everything from handguns to sporting rifles and all the accessories to not only consumers, but local, state, and federal law authorities. The Company and its stock are clearly poised to benefit from what should be a booming sector. After all, even after one buys a firearm one must purchase ammunition to go with it. And ammo is flying off the shelves so fast that even law enforcement cannot keep up with its own needs.
Looking at forecasts and expectations only reinforce the thesis that now may be the time to get into SWHC. EPS is forecast to leap from $0.40 per share in FY12 to $1.20 in FY13 as revenue grows from $412 million to $580 million. Those are 300% and 40% increases, respectively. From a technical perspective, the fact the stock is down nearly 20% since early December may be another bullish signal to buy now.
We think a pop to $11 in pretty short order is a definite possibility.
Have a great week!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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