Are You Feeling Lucky?

As a precursor to my Final Word article in the main magazine next month, I’ve been examining the firearms market in the US.

One of the biggest names in guns, one that may even be the most famous name in the world, is now in voluntary Chapter 11 bankruptcy protection. Colt. Heavily reliant on orders from the US military, those orders having all but dried up, has put the company under huge pressure. Colt is saddled with huge debts, and unhappy creditors forced their hand. Again I have to say that we are in a very benign environment for corporate debt with interest rates being so low. Chapter 11 might have happened five or so years ago if interest rates were at proper levels.

It doesn’t mean that America has fallen out of love with guns though. Some US towns have even made it compulsory for all residents to own a firearm. Forget England when examining American attitudes! A friend of mine there told me she was thinking of getting a little handgun for her purse. A small pink one she said. I thought this was a joke. It’s not. Smith & Wesson are just one of many manufacturers to offer this ladies’ fashion accessory. $449 if you’re interested. Here’s what they say about it in the catalogue:

“Lightweight Aluminum Alloy Frame with SS Chamber and pink handgun grips. Do not judge this little monster just because of its size. You will be surprised that even with its size, it can do serious damage to anyone who plans to do you harm.”

The S&W only has pink grips, but Charter Arms offer a ‘Pink Lady Special’ with a pink body described as:

“The Charter Arms Pink Lady 38 Special is the ideal handgun for women to carry around wherever you go; be it to your office, going out with friends, or coming home to a dark house.”

Always a winner to have a handgun about you when going out for dinner with friends eh?

Smith & Weston has a reasonable looking chart. The problem with it is that it hasn’t broken out. However, that is also Catch 22. I personally hate breakouts that the world and his wife can see, and who can’t see a breakout? As private investors we should be seeking the unusual. Given something like 95% of private investors lose, we need to be clever in finding trades, and breakouts are not in the least bit clever. Pretty sure next door’s cat could trade breakouts. There is one exception though: breakouts to an ATH. If we do get back up to the resistance from the previous high it could be regarded as early entry for the breakout to a new ATH with a stop below the previous high (blue line). But of course false breakouts are more common than successful ones, so caution required.

The Taser chart looks really good though. It’s hard to find something I don’t like about it. There’s a great trend in the current rally: higher lows all the way and now a new ATH. I know Tasers aren’t guns per se, but they are favoured by many law enforcement agencies, so you can see where the growth is coming from. It’s new technology too, so the market is not likely to be saturated. Worst case scenario would be a competitor. Meanwhile the chart looks great and I’d be looking for a decent entry around current levels.