TIVP025: SMITH & WESSON (SWBI): DEEP VALUE — LOCKED AND LOADED

W/ DANIEL MAHNCKE & SHAWN O’MALLEY

22 June 2025

Shawn O’Malley and Daniel Mahnke break down Smith & Wesson (ticker: SWBI), an iconic firearms manufacturer with 170+ years of history. Smith & Wesson is no compounder, though. It’s an okay business, at best, but Shawn and Daniel want to determine whether this often-overlooked stock is cheaply priced.

In this episode, you’ll learn how Smith & Wesson has navigated the volatile sales cycle in firearms, what factors can drive the biggest swings in firearms sales, whether Smith & Wesson’s juicy dividend is sustainable, the biggest political and legal risks facing this company, what famous investor owns the stock, how Smith & Wesson shares can help an investor hedge societal disruptions, and whether Smith & Wesson is attractively valued on a normalized earnings basis plus so much more!

Prefer to watch? Click ⁠⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠⁠⁠ to watch this episode on YouTube.

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IN THIS EPISODE, YOU’LL LEARN:

  • The historic origins behind this company that predates the Civil War.
  • Why “Sin” stocks can offer attractive returns from discounted valuations.
  • What drives Smith & Wesson’s business.
  • How the company navigates a range of factors that can impact it, from regulation to litigation, that are largely beyond its control.
  • The biggest challenges of investing in a “mean reversion” bet like Smith & Wesson.
  • How the company’s relocation of its headquarters has added to its financial stress.
  • Why Smith & Wesson may be a hedge against societal disruptions.
  • Whether Shawn & Daniel add SWBI to The Intrinsic Value Portfolio.
  • And much, much more!

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

 

[00:00:00] Shawn O’Malley: Pistols are by far the most popular firearm in the US. Something like 40 or 45% of gun sales every year being pistols. And in that market, Smith and Wesson has the largest market share at about 20%. So correspondingly pistol sales can drive as much as 75% of their revenues. But firearm sales are very cyclical.

[00:00:21] Shawn O’Malley: We’ve already alluded to that a few times. So the other thing they do is that when there are fall offs in firearm demand, and therefore also production, they use their manufacturing capacity to support third party businesses. And basically they try to keep a steady capacity at their production facilities, either by producing their own products or in down times offering manufacturing services to other companies to better monetize their physical assets.

[00:00:55] Daniel Mahncke: So before we get started, I want to just emphasize a recent announcement from Shawn that I, in case you missed it, we are launching a new private investor community devoted to intrinsic value. And so we will open up 30 limited spots to the public for context. This is a community that will be dedicated to sharing and giving feedback on investment ideas, networking with like-minded investors, exploring our curiosity in the investment world.

[00:01:22] Daniel Mahncke: And with the membership comes the opportunity to also join calls with famous experts. We already had some great guests on and we have half a dozen scheduled for the coming weeks. After just our first announcement in our newsletter, we already got a ton of applications, even more than we thought we would.

[00:01:39] Daniel Mahncke: So if that interests you at all, I would encourage you to head over to theinvestorspodcast.com/intrinsic-value-community before all the spots fill up. Again, that’s theinvestorspodcast.com/intrinsic-value-community. We’ll also put the link in the descriptions of this episode below, and with that, let’s get right into it.

[00:02:03] Daniel Mahncke: So today we are taking a change of pace and leaning more into the value investing in a more classic sense, Shawn, you’ve briefed me on your plan to pitch Smith and Wesson, which is arguably the most famous firearm manufacturer in the world, and that probably immediately elicits a range of emotional responses for people.

[00:02:23] Daniel Mahncke: It’s going to be very important for us and listeners to separate out their personal views as we try and consider the investment merits. I’m really curious to hear your arguments though, for why we even should consider a company in such a controversial industry and a company that doesn’t exactly have the stellar operating results.

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