As a longtime tech analyst and investor, I've learned that tracking unstoppable trends is a great way to make money.
For instance, the mobile wave is moving so fast it's turning small-cap companies into financial juggernauts, seemingly overnight.
The same thing is happening with cloud computing. Simply put, there's a stampede of firms that want to host their data and applications on the web - and are willing to pay top dollar for those services.
But, strictly speaking, not every big-gain opportunity is a true high-tech trend.
That's why I always keep a sharp eye out for new investing opportunities that are in related areas.
The mid-cap company I'm recommending today, for example, is a leader in what I call personal defense technology.
And it's about to "outgun" the market - big time...
Hitting the Bull's Eye
The political views are wide-ranging on this one. But when you look strictly through the lens of an investor, the storied firm we're going to cover today consistently hits the bull's eye. And, as Money Morning's defense analyst, it's my job to let you know...
Fact is, there are millions of sportsmen out there who, like me, like to spend their weekends in amateur events like shooting trap. It's one of several shooting events for which one can win an Olympic medal.
No, I don't have any illusions that I'll get that good...
But I will say this: Shooting trap has definitely made me a better investor.
And the reason is simple.
You just cannot do well in a sport like this unless you learn how to block out all the distractions around you.
Consider that in trap you stand at least 16 yards from a short "house" that throws out targets the size of compact discs at about 45 miles per hour. Not only are the clay pigeons flying away from you at high speeds, but they often move at sharp angles that are hard to track.
Hitting those fast-moving targets requires the same skill you need to make money investing in stocks - you absolutely have to focus with laser-like precision.
So, I'm happy to report that my philosophy stood me in good stead a few weekends ago when I won a trap-shooting contest at my local northern California range, the Martinez Gun Club.
Just as I do with studying the markets every day, I had to filter out a lot of noise, including some loud spectators excited about the intense duel unfolding before them.
That's one of the things I really like about Sturm, Ruger & Company (NYSE: RGR).
It's On Pace to Double Profits Over the Next Two Years
Founded in 1949, Ruger today produces hundreds of thousands of firearms annually for hunting, target shooting, collecting, self-defense, law enforcement, and government agencies.
Along the way - and this is my favorite part of the company's history - Ruger eventually swallowed four of its biggest rivals.
Today, it can barely keep up with demand for its products and has even had to stop taking new orders for months at a time.
If anyone knows how to make money selling firearms, it's Ruger...
Ranked as the largest U.S. gun maker by sales, the company reported blowout Q3 earnings on Nov. 5. Earnings per share soared 64% to $1.44. That's about 19% above industry estimates of $1.21.
And Ruger beat on sales, as well. The company said revenue climbed 45% to $170.9 million in the period when Wall Street was expecting a mere $154.3 million.
To achieve those high numbers, Ruger outsold the entire industry.
So far this year, gun sales are up 22%. That's based on the federal National Instant Criminal Background System, to which gun stores submit applications to make sure buyers are legally eligible to own guns.
Also during the quarter, the Connecticut-based company said it bought a 220,000-square foot factory in Mayodan, N.C., to meet surging demand for its guns. Ruger said it expects to begin production there by the end of Q1 2014.
With a market cap of $1.4 billion, RGR trades at $73 a share and a PE of 13.6, a discount from the overall market's ratio of about 15. It has a 16% profit margin and a return on shareholders' equity of a stunning 64%.
Over the past year, the stock is up 45% - about 60% more than the overall market. But Ruger still has plenty of room to run. Over the past three years, it has maintained an EPS growth rate of 60%.
At that rate it could double profits again in less than two years.
The main weakness for the stock in the short term is the fact that the company recently cut its dividend. However, Ruger explained that it did so because it makes payments to investors on a strict percentage basis, whether that means the amount goes up or down.
It's always possible the stock could come under some pressure in the short term. But it has so much going for it that the rally is bound to resume.
Now then, some investors may wonder about the upside for Ruger's rival, Smith & Wesson Holding Corp. (Nasdaq: SWHC). Smith & Wesson is also an excellent company that has some great products. Believe me, I own some.
No doubt, Smith & Wesson has greatly improved its financials over the years that I've followed the firm as a defense analyst. My main concern about Smith & Wesson right now is that the stock remains a laggard.
Over the past year, SWHC is up a scant 9%. That's about one-third the S&P 500's return of 28% over the period. I think Smith & Wesson will eventually rally but may do so in volatile trade.
Investors who want to have both profits and safety of principal at this point would do better to focus on the clear industry leader.
Ruger isn't just a great firearms firm; it's one of the best-run companies in America.
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.