Wednesday, March 6, 2013

One That I Missed

Just about one year ago a relative of my wifes got all excited about one particular stock. Smith & Wesson Holding Company (Nasdaq  SWHC). At the time they were trading at just above $5.30. they were of interest to me. They make and wholesale guns and a variety of weapons, so would appear on the face of it to generate lots of lovely cash.

At that time though sales were relatively flat, there was no dividend and quite a debt load with uncertain prospects. 

My wifes aunt  was quite bullish though but I backed out gracefully saying it wasn't for me.

This week however Smith & Wesson posted massive sale and stock prices topped the $10 mark, though they have now fallen back.

According to Bloomberg TV this morning Smith & Wesson had a exceptional third quarter ending January. Sales of guns rose following the school shootings in Connecticut in December and the subsequent calls for federal gun control.

The main reason I can see for my missing this particular boat is my personal ignorance of the market for guns.

Not being an American by birth and not being immersed in a gun culture. I didn't see the calls for gun control as a positive for a company which sells guns, in fact it is a definite negative. But then I ignored the love affair many Americans have with the Second Ammendment and the right to bear arms.

In this case I missed out on an important facctor. The emotion of panic can make some people run out and buy some remarkable things if they believe they won't be freely available in the near future.

Would I buy SWHC today? No, I missed that boat and it may be a short lived boost in sales.

But it makes the point that knowing all aspects of the market is important to investors.

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