Gun Stock Alternatives: Small Cap Taser and Stun Gun Makers (TASR, SDEV, STYS & LLLI)

Gun stocks like Sturm, Ruger & Company (NYSE: RGR) and Smith & Wesson Holding Corporation (NASDAQ: SWHC) along with the institutional investors who own them are bound to be under some pressure (at least temporarily) after the Sandy Hook shooting tragedy, but small cap stocks like TASER International (NASDAQ: TASR), Security Devices International (PINK: SDEV), Stinger Systems (PINK: STYS) and Lamperd Less Lethal (PINK: LLLI) offer non-lethal alternatives to guns. And given their recent trading volumes in the wake of the Sandy Hook tragedy, it does appear that some investors or speculators have taken notice of them as their products offer protection without the risks that guns come with when they get into the wrong hands.

Beginning with TASER International, it makes Electronic Control Devices (ECDs) that are used worldwide by law enforcement, military, correctional, professional security and personal protection markets. On Monday, TASER International closed flat at $7.65 for a market cap of $393.33 million, but its trading volume was 1.36 million shares verses the normal daily average of 640,916 according to Google Finance. TASER International is up 49.4% since the start of the year, but its also down 46.9% over the past five years. In late November, TASER International briefly got tasered by J.P. Morgan analyst Paul Coster who cut his rating from Overweight to Neutral more or less on a valuation call as the stock had rallied 50% over the previous 2 months while the S&P dropped 2.6%. Coster did concede that he still sees potential upside to financial estimates from a Taser X2 upgrade program plus other factors like international expansion, but he added that significant margin expansion seems unlikely. Given that TASER International has a trailing P/E of 87.93 and a forward P/E of 29.42, new investors should also be concerned about the stock’s valuation.

Other makers of non-lethal alternatives to guns include the following stocks that trade on the OTC and tend to have light trading volumes:

• Security Devices International (PINK: SDEV). A defence technology company specializing in the development of innovative next generation non-lethal ammunition, Security Devices International is in the market-entry phase of deploying its family of non-lethal ammunition to global military law enforcement and correctional agencies. On Monday, Security Devices International fell 2.38% to $0.41 for a market cap of $12.15 on slightly higher than normal trading volume (which is around 8,000 shares). However, Security Devices International is up 290.5% since the start of the year. Back in October, Security Devices International announced that Macquarie Private Wealth would will act as agent for an offering of common shares of the Company for gross proceeds of $2,000,000 that will be used to move SDI forward to compete in the global defense marketplace. Otherwise, Security Devices International has reported no revenues and net losses of $351k (most recent reporting quarter), $348k, $252k and $204k.

• Stinger Systems (PINK: STYS). A producer of a variety of control products, Stinger Systems’ products include Ice Shield, an electrified riot shield; Band-It/REACT system, a remote controlled or movement controlled electrified wrap used for controlling potentially dangerous detainees in public situations or during transport; and the S-200 AT projectile stun gun. On Monday, Stinger Systems closed flat at $0.0023 for a market cap of just $10,805 and trading volume averages just 436 shares a day. Stinger Systems is also down 46.5% since the start of the year and down 99.1% since early 2010. Moreover, Stinger Systems’ website has been temporarily disabled and there are no financials available for after 2009.

• Lamperd Less Lethal (PINK: LLLI). Based in Sarnia, Ontario Canada, Lamperd Less Lethal designs and manufactures specialized civil defense equipment as well as provides comprehensive training to different groups of Public Safety Agencies around the globe. Lamperd Less Lethal’s area of specific of expertise is in less-lethal tactics and equipment with a special focus on munitions and launchers that are designed to ensure the safety of military and civil defense personnel by disabling an opponent rather than killing them. On Monday, Lamperd Less Lethal rose 33.33% for a market cap of $900,200 on trading volume of 27,000 verses a normal trading volume of 13,168. Lamperd Less Lethal is up 25% since the start of the year and down 4.7% since the beginning of 2009. However, I am not seeing any financials for Lamperd Less Lethal from any quarters after 2008.

The Bottom Line. Investors who aren’t speculators will want to give small caps Stinger Systems and Lamperd Less Lethal a pass while Security Devices International is worth watching and it might be too late from a valuation standpoint for new investors to get into TASER International.