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Oct 5, 2016

S3 BLACKLIGHT: Short Sellers Aiming for Smith & Wesson

Short interest in Smith & Wesson (SWHC US), the firearm manufacturer used by both consumers and law enforcement, has been rising significantly since the second week of September.  This is despite the company reporting on Sept 1st a 40% jump in sales, with profit doubling during the first quarter of its fiscal year.                                               

According to the S3 Velocity Indicator, a measure of the real-time relative change in shorting activity, the 7-day trend line has skyrocketed since hitting a trough on 9/7.  Due to this recent surge, current short interest is now estimated to be at an all-time high of $350million in short exposure.  One would need to look back to March 2014 to find short sentiment hit its previous peak of $305million.  

The “elephant” in the room and main driver of short conviction can potentially be attributed to the upcoming Presidential election in November. With Hillary Clinton and her powerful anti-gun stance leading the polls over NRA backer Donald Trump, short sellers are positioning themselves to reap the rewards if the Democratic nominee comes out victorious and moves to implement her restrictive gun legislation, impairing the revenue outlook for the entire firearm industry.  

For more information on the above analysis, please contact:
Matthew Unterman, Director, S3 Partners, LLC    

The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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