Virginia-basedAlliant Techsystems (
) is drifting toward its 10-week line, which could set up a
buying opportunity, provided a market uptrend returns.
The stock broke out of a flat base in March. The stock
returned to its 10-week moving average in April and is
approaching the line again.
A trip toward the 10-week area in June never touched the line,
so the current retreat is only the second trip to the line. (The
50-day line has yet to be touched.)
The first or second bounce off the 10-week line in strong
volume can create a secondary buy zone. Later bounces are less
likely to work.
The stock's quarterly dividend is 26 cents a share, which
works out to an annualized yield of 1.1%. This is well below the
S&P 500's dividend yield of 2.53%. Year to date, however,
Alliant is up 56% vs. about 16% for the S&P 500.
Alliant's fundamentals, though, raise some questions.
While earnings leapt 61% in fiscal Q1 ended in June, sales on
a year-ago basis were flat. Why so?
Alliant's business involves three segments -- defense, 39% of
sales; sporting, 33%; and aerospace, 28%.
For the quarter, sporting sales grew 28% and aerospace 2%. But
defense dropped 13%.
Trends haven't been helping defense sales. In 2011, the Budget
Control Act cut U.S. defense spending by $490 billion over 10
years. In January, further budget cuts, or sequestration, would
cut an additional $500 billion from defense over the next nine
That's almost $1 trillion in cuts.
Alliant recently took a step to boost sporting sales, which
involve ammunition, rifles and shotguns. (Military ammunition is
recorded within the defense segment.)
In June, Alliant acquired Caliber Co., the parent company of
Savage Sports, a long gun manufacturer.