Adm 4425 – Investments
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ADM4425 – InvestmentsJune 202017Shawn Dickerson, 234870Final ReportTable of ContentsBrief Overview of a Company 2American Outdoor Brand Corp. (AOBC) 2About AOBC 2Threats to AOBC 3Management of note for AOBC 3Conclusion for AOBC 4Important Economic and/or Market Event 4After-the-course reflection 6What I’d do differently 8Moving Forward 9Near future of investing for me 10Appendix A 11Brief Overview of a CompanyAmerican Outdoor Brand Corp. (AOBC)About AOBCWhy some of us may not be familiar with this company is because they just went thru a rebranding of their organization. It was called Smith & Wesson Holding Corporation up until January of 2017. This company trades on the NASDAQ and is in the industry of Capital Goods. AOBC was founded in February 15, 2002 and is headquartered in Springfield, Massachusetts, United States.[1] AOBC has several popular consumer names in shooting, hunting and outdoors realm of consumer goods. They operate in two segments, one being firearms and the other being their outdoor products and accessories. For their firearms they have the world renowned Smith & Wesson guns brand and for accessories, keygear, OLD TIMER and Imperial knives, and for me a bit surprising were AEDs (automated defibrillators) under the Deep River Plastics name and they also sell hand cuffs under the Schrade name among other countless products.[2]The firearms segment is their core business that accounts for most of their sales which increases 60% year over year. As for the accessories segment, this is their newest area that targets things like camping, hiking, fishing, paddling sports and is a smaller portion of the business with around $39 million in sales. This area has high gross margins hovering around 50%.2The Smith & Wesson name has been around since 1852 which is an undisputed leader in the firearms industry where a one out of 2 revolver owner in the US is familiar with Smith & Wesson with half of the general population over 18 years of age knowing the brand and 9 of 10 handgun buyers are familiar with the name. [3] This gives AOBC a significant advantage in this industry a significant aid to their moat compared to their competitors. AOBC has been in the industry for long, under a parent company name, giving it a very strong brand. AOBC operates like an umbrella corporation of their diverse businesses. They all use the same back office administrative functions like accounting, human resources, legal into a centralized operation letting the divisions focus on what they do best, innovation and growth.[4] AOBC has a P/E valuation of margin of safety 13% with an analyst’s 5-year growth estimate of 15% along with having a beta of -0.36, meaning that the stock value tends to go down when the market goes up and vice versa, from Yahoo Finance.[5] AOBC doesn’t appear to be close to bankruptcy scoring an Altman Z score of 5.52 with a Piotrosky F score of 7 based on gurufocus.com’s analysis as of June 16, 2017. [6]
Threats to AOBCAs for threats to AOBC, they are threatened by legislation, though there is proposed Constitutional Concealed Carry Reciprocity Act that is being proposed by a US senator in Texas that proposes to the loosening of concealed carry laws.[7] This could prove to increase sales for gun sellers and manufacturers.Gun sales have been sporadic before the election with Hilary Clinton threatening to change the way Americans deal with guns looking for more background checks and gun control reform which led to a surge on gun purchases in addition to random tragic events that created huge spikes with AOBC and their competitors.4 As for competitors in the Ordnance and Accessories industry are noted in Table #1:Company nameStock Price ($)52 Week High/Low ($)P/E Ratio (current except for Vista)Market Cap.American Outdoor Brands Corp.24.0731.19/17.5010.271.350BNational Presto Industries, Inc. (NPK)102.90112/81.3816.09719.1MSturm, Ruger & Co., Inc. (RGR)63.0078.09/47.1513.731.11BTASER International, Inc.21.9030.15/17.1868.441.15BVista Outdoor Inc. (VSTO)21.9153.09/19.72-5.541.25BTable #1: