About a year ago, a familiar name popped up on the Magic Formula stock filter: Ruger (RGR). In the house I grew up in, this name was as well-known as Smith & Wesson and Colt Firearms are to others. My father used to be a hunter and gun collector, he checkered the grips on some of his guns, reloaded his own ammo, and even made bullets on the stove top. When I saw Ruger on the list, I immediately called him.
Dad: "Hello?"
Me: "Hi, Dad."
Dad: "Hi, Lori."
Me: "Are you in bed?"
Dad: "Yes."
Me: "I'm sorry. As long as you're awake, though, I wanted to ask you about something."
Dad: "What is it?"
Me: "Ruger stock is selling at a bargain price. Is that a good brand of guns?"
Dad: "That's one of the best there is."
Dad went on to tell me about other brands whose ownership and quality had changed back and forth, and another who had turned to using poor quality steel. But Ruger was one who made the good stuff. And their financials looked good to me. According to the spreadsheet I made then, for 2009, Ruger had no long-term debt, a return on equity of 22%, gross profit margin of 32%, adjusted debt to shareholders' equity* of 37%. Results for 2008 and 2007 were more or less similar. It looked like a company with a durable competitive advantage selling at a good price.
I bought Ruger at $12.29 on April 5, 2010, and at $13.14 on October 1, 2010. It last traded at $17.51, a gain of 42% since April 5 and 33% since October. That doesn't include dividends. In comparison, the S&P 500 (no dividends) has gained 11.15% since April 5 and 15.15% since October 1.
*Total debt / (shareholders' equity + treasury stock)
