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Two Pistol-Packing Stocks

Sturm, Ruger offers single-shot, auto-loading, bolt-action, and sporting rifles, shotguns, rim fire auto-loading and center fire auto-loading pistols and single-action and double-action revolvers. The company also manufactures and sells accessories and replacement parts for its firearms.

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

In addition, RGR provides investment castings made from steel alloys directly or through manufacturers representatives. The company sells its firearm products through independent wholesale distributors to the commercial sporting market under the Ruger name and exports its firearms through a network of commercial distributors and directly to law enforcement agencies and foreign governments. Sturm, Ruger was founded in 1948 and is based in Southport, Conn.

The one-year chart below is like a picture that paints a thousand words. You can clearly see that quarterly earnings per share on a year-over-year comparison ending Sept. 29 had grown (according to the company's earnings report) by 61.6% and quarterly revenue growth surged nearly 47%. RGR Chart RGR data by YCharts

While you wait for the share price to regain its former heights (shares tumbled to a low of $40 after the tragedy in Newtown, Conn.) you'll be earning a $1.53-a-year dividend, which represents about a 3.56% yield-to-price if shares are purchased at $43. This is from a company with no debt, total cash (most-recent-quarter) of over $105 million and a dividend yield which represents a sustainable payout ratio of only 34%.

It appears the fear of new gun-control legislation and possible limitations on gun and ammo sales has been depressing shares of Sturm and Smith & Wesson (SWHC - Get Report). Those fears are overblown, in my opinion, and the daily evidence is both companies are seeing sales skyrocket. What do you think that will do for EPS and revenue during the current quarter? The answer is self-evident.

The share price of SWHC has retreated to levels we haven't seen since last summer. This in spite of the company's skyrocketing quarterly revenue-per-share and its diluted EPS growth. Again, let the chart give you the powerful picture. SWHC Chart SWHC data by YCharts

Smith & Wesson's price as of Thursday is only $8.25, which represents a trailing PE of less than 10 and a forward (one-year) PE of less than 9. Its price-to-earnings-to-growth (PEG) ratio has dropped to 0.35, an indicator that SWHC is quite oversold.
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RGR $67.17 1.37%
SWHC $22.87 0.93%
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