Personal Finance

Forget Smith & Wesson Holding Corp.: These 2 Stocks Are Better Buys

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Image source: Getty Images.

A bet on Smith & Wesson Holding (NASDAQ: SWHC) isn't so much about the firearms business anymore as it is emotion. When fears of gun control run high, its business -- and its stock -- run higher. Yet as we saw after the November elections, when those concerns cool, so does its stock (even though the gunmaker doesn't agree its business will be any less frenetic in the future).

Shares have fallen 10% since the election, and are down more than 22% from their all-time high in August. Moreover, now that it's getting into the extreme outdoors gear business and changing its name to American Outdoor Brands, there's a degree of uncertainty surrounding how its performance will play out. That's why I'm highlighting two other companies in the broad aerospace/defense sector that Smith & Wesson also occupies -- businesses that exhibit strong operational capabilities and whose stock holds lots of promise, despite having already posted significant gains in 2016: DigitalGlobe (NYSE: DGI) and National Presto (NYSE: NPK) .

DigitalGlobe

Consider it an eye in the sky. DigitalGlobe operates a fleet of four orbiting satellites that collect high-resolution images and data about the Earth's surface; and it recently launched its fifth satellite, the WorldView-4, which was built by Lockheed Martin and more than doubles the company's capacity to collect the world's highest-resolution 30-centimeter commercial satellite imagery.

Npk Defense

Data source: National Presto annual SEC filings.

This past June, National Presto's AMTEC division, the world's largest volume producer of 40mm ammunition, received an $84.5 million contract from the Army for 40mm grenade systems to be used in Iraq, running through 2018. The Army said only one bid was received for the contract, but that just might be because AMTEC is currently the sole prime contractor to the Defense Department for such ammo. AMTEC acquired the only other prime contractor for such munitions, DSE, in 2013.

Since the election, National Presto's stock has risen nearly 20%, perhaps in part due to President-elect Donald Trump's stated commitment to upgrade U.S. military capabilities. It may be able to translate its prime contractor status into additional contracts as a result. Yet it's also noteworthy that its absorbent products business -- the one that makes adult diapers and pet pads -- has finally turned profitable after years of loss-making.

You might think only of National Presto for its kitchen gadgets, but there's a lot more going on under the hood, and those segments ought to allow it to rise higher.

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Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. The Motley Fool recommends DigitalGlobe. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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