Forget about Star Wars and its sleek but imaginary universe of high-tech personal weaponry. Out here in the real world, the business of guns and ammunition has been stuck in the Old West for decades, forcing investors into a no-win strategic scenario . . . until now.
A little company called Ammo, Inc. (POWW) has spent the last few years rethinking the fundamentals of this $20 BILLION industry. They’ve got a fresh take on everything, from packaging to the “wow factor” that drives modern sales and profit margins. And NOW it’s easier than ever for investors to get a taste.
We’ll talk about the specific factors that differentiate new POWW products from granddad’s shells later in this report. If you’re a regular at the shooting range yourself, you might’ve already seen them. In that scenario, you know what makes them special in a world of me-too ammo. You’ve seen word of mouth spread like views on the YouTube videos.
Chances to invest in that kind of viral buzz are rare. The biggest one I remember was Apple (AAPL) when a new product called the “iPod” was transforming the boring, commoditized world of consumer electronics. This was before the iPhone and other devices, but the principles were the same: when everything on the shelf looks the same, think different. Give people with extra pocket change an alternative, a way to trade up to an enhanced experience. The buzz went viral. Apple had its first modern must-have product, a real category killer.
And for shareholders, the experience has been incredible. Back when the iPod launched, Apple was a $16 stock. Since then, the stock has split 14 for 1 and paid a $12 dividend on every share . . . and it’s STILL nudging around $200. That’s the power of “thinking different,” right there. It’s the kind of thinking that built the POWW business plan.
POWW makes ammunition with “wow factor.” There’s revolutionary Streak Visual Ammunition that only people on the range with you can gasp at . . . you don’t give your position away and it’s even non-incendiary – meaning it’s not on fire and doesn’t catch other things on fire. In an indoor range, the benefits are obvious.
Streak is the game changer for this industry. The retailers are crazy for it. For one thing, you can shooting normal ammunition is like hitting golf balls and not being able to see them until they land. You can’t adjust your grip, stance or swing to correct the shot. With Streak, you can see the bullet travel and adjust immediately to more accurately hit your target
Each is unique. Each proprietary. They’re not priced like a $999 iPhone, but the premium characteristics of each one earn POWW a lot more than somebody selling a me-too $0.24 commodity shell could ever hope to see.
So that’s the competitive edge that can turn POWW into the disruptive Apple of Ammo. They’ve learned a trick or two from Silicon Valley. Now it’s time to get the word of mouth out there and start chasing total market domination. Let’s start with the buzz and work to the big boom.
Management was no stranger to the economics of industries where tiny design decisions drive massive sales. CEO Fred Wagenthals built a $400 million company out of die-cast cars. That business was all about precision and picking the details that matter . . . the fine points that make obsessive collectors pay any price.
Wind the world of personal firearms back to 2016 and while there were high-end collectible weapons, they still used the same mass-market rounds as the proverbial Saturday Night Special. It was literally like pouring cheap ethanol into a Lamborghini or pairing a $100 steak with frozen spinach and a cup of instant coffee. Not only did it feel wrong, but the industry was leaving money on the table. People willing to pay close to $50,000 for a beautiful hand-engraved Jesse James pistol aren’t going to balk at an extra $0.05- $0.10 per round. They’ve got the money to spend and premium tastes.
But those rounds have got to be as beautiful as the pistol. That’s one of the first things POWW did. Working with Jesse James himself (a legend), they designed shells that are sleek, distinctive and sexy . . . harnessing the finest ballistic science to ensure that they shoot as smooth as they look. Sure, they cost a few pennies more than the boring old bullets Winchester has been selling for ages. But if you’re serious enough to own a serious gun, you appreciate the fine details, and want to shoot the best ammo in that gun.
Granted, those sleek high performance shells cost a little more to produce. But think of Apple. The iPod wasn’t the first or cheapest portable music box on the market, but it was the prettiest and the most fun to use. It bridged the gap from “killer apps” — which in POWW’s world would be the extra engineering of each bullet — to the primordial greed response that makes us NEED to try the gizmo and fall in love right away.
That response is always worth a premium price that more than justifies the added cost. Apple became the most profitable consumer electronics company in history for just that reason, and they did it at a moment when consumer electronics profit margins were racing to the bottom. Back in 2001, the world was full of cheap stereo equipment. Sony and the other giants were discounting themselves to death.
And back in 2016, that’s where the firearms industry was headed. Pre-election stockpiling cleared hunting supply store shelves all over the country . . . but then the urgency evaporated, leaving the stores with a lot of inventory that’s going to take a few years to work off. It’s the kind of hangover that made Remington go bankrupt. Even little POWW ultimately had to take a loss last year in order to liquidate old product that they had acquired in the asset purchase.
But unlike the dinosaurs, POWW got ahead of the cycle. They took a few months to ponder just who was still spending money at the gun store (hint: younger guys and girls, 18 to 40) and what kind of product would open their wallets wide. The sleek super-high-end shells came to mind as something new and sexy, a way for a new player to build a loyal following and grab market share.
Remember, while you can stockpile shells to the ceiling, each one you fire is destroyed and needs replaced. If POWW shells sell out, stores reorder. And as the “wow factor” spreads, people who see POWW ammunition reach for the nicer packaging and enjoy its better performance. They literally ask for it by name.
Industry endorsements: POWW already has Jesse James on its side. They’ve also got “shoot like a girl” competitive shooter Jen Blake winning championships with their ammo . . . it’s hard to beat “flawless” performance when it comes to proving to people that these are the round you want to load. The legendary Jeff Rann is also on deck to speak to the hunting audience. And yes, the NRA itself is receptive to something new on the shell shelf.
Expanding retail distribution: For such a little company, POWW is already in a lot of stores. There’s Sportsman’s Guide online. Sportsman’s Warehouse throughout the Mountain West and up to Alaska. Crow Shooting Supply . . . one of the top wholesalers to the independent channel. Gander Outdoors in the Midwest. Each one plays out a pattern where a manager or chain buys a box or two as a novelty and sells out fast. They keep reordering. We’ll see the results play out in future earnings reports.
The big prize: Retail is nice, but law enforcement and the military are where the huge volume happens. POWW brought Kathy Hanrahan onboard to help land those contracts. You might remember her as chief operating officer of an obscure company called Taser that, you know, turned the taser into a $3 billion company doing $100 million in sales per quarter — largely to “law enforcement and the military.” Purchasing officers definitely remember her. Municipalities are eager to outfit their force with better ammo… especially Streak bullets you can see. In a world of body cameras and liability, it’s practically a necessity.
Reading between the lines, I get the feeling government agencies are going to want to keep up with the local talent, so there could be a groundbreaking contract on the horizon. Even a “trial deployment” could mean millions of rounds for POWW before it even becomes a rounding error on the federal bullet list. Homeland Security’s ammo needs sometimes get overstated, but we can all agree they fire off a lot of rounds every year for training and enforcement purposes. Remember, a fired round is destroyed. What would you rather replace it with, granddad’s old slug or POWW’s advanced technology?
Now looking up at that chart, it’s already clear that POWW is moving at an entirely different tempo from the old world gun stocks that hit a wall back in 2016. POWW started out quiet and has started soaring now. The buzz is clearly building — this chart looks more like a Silicon Valley powerhouse in the early phase than anything else. Every day counts.
And I’m just going to leave you with one last point for now. POWW did all that up there without ever leaving the OTC market. They just filed the paperwork to move up to the Nasdaq where institutional investors can join the party. We haven’t seen anything yet! Remember Apple down at the equivalent of $1 before the splits, before the iPod changed music? Welcome to the future of weaponry . . . the Star Wars we were promised.
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