1) Final $LOOT thread. On May 29, I wrote a thread joking that I was long a basket of companies that did well if the riots and looting acceleated (as I suspected they would). I felt that I had VERY low risk as the basket was cheap on valuation.
2) Over the next few weeks, people lost their collective minds and torched many large cities, while begging for police to be de-funded. There was a massive run on guns and ammo that surprised my own expectations.
3) Over those 2 months, I sold out of the core names as they rallied. Some like $DGLY were multi-baggers, while other substantially larger positions like $SWBI more than doubled and $VSTO was up almost that much. I really thought they’d come for $VTSI and maybe they still will.
4) $RGR was my largest position on account of its balance sheet and impossibly low risk of loss. Last night $RGR reported great earnings, a massive backlog and a special dividend.
5) That said, I run a fund focused on capturing inflections. Part of capturing inflections is sitting with lots of excess capital so you can pivot when something happens. As I thought about earnings last night, I realized that Q3 is likely as good as it gets.
6) Of course gun demand can go parabolic, but anyone who wanted one based on the latest riots rushed out and got one or ordered one in Q2 for Q3 delivery. $RGR valuation isn’t particularly stretched here, but I’m a deep value investor and it ain’t as cheap anymore.
7) I’m up 30% in 2 months and that seems like a victory, when added to my larger wins on the rest of the basket. I want to increase liquidity for the next event (whatever that is) and in the interim, Event-Driven trades are doing so damn well, it’s hard to tie up capital.
8) I wouldn’t be surprised if $RGR goes much higher, but I think my capital is better deployed in Event-Driven or writing $RGR puts at a high single-digit monthly yield, which gets me back long lower. I have been doing the same on other $LOOT names.
9) It’s been a stunningly good 2 month run for $LOOT. But all good things end eventually... ~KUPPY
