Wednesday, November 13, 2019

Vista Outdoor Catches a Bid

About eight months ago, I wrote about Vista Outdoor as a potential value stock. Since then, I have not loved the progress the company has made. Asset sales took longer than expected and at lower prices, restructuring costs ballooned, and revenues continued to plummet despite what looks to be a recovering firearms market.

The stock price reaction mostly agreed with my sentiment, as it continued to fall over the last few months. Until two weeks ago, that is, when a more pleasing quarterly report sent shares up over 40% over the course of the next two weeks. I did not share the immense optimism demonstrated by the stock, and so I sold out for a small gain.

While management has done a solid job cutting costs and reducing debt, the obligations remain rather large, especially as the business has shrunk due to asset sales. I just don't love the risk-reward as much as I used to, so I took advantage of the uptick to get out.

When I like a company as a value stock, I sometimes like it's competitor(s) as well. This is because entire industries, rather than just companies, can become hated at the same time. Such has been the case in the firearms industry. I rotated some funds into American Outdoor Brands (AOBC) a few weeks ago, and I continue to hold that position.

Disclosure: Author has a long position in shares of AOBC

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