Should the United States have more stringent gun restrictions? It is far easier to get a weapon in the states than any other part of the developed world and the violence resulting from guns being far more prevalent than anywhere else. Despite this, political aversion to the issue makes it unlikely that any major reforms will be enacted anytime soon.
This reality has significant implications for the gun industry as a whole. Even though it has appeared for a number of years now that guns would not become any more difficult to obtain, that has not stopped paranoid enthusiasts from going out and buying up as many firearms as they can before President Obama has a chance to cut them off if reelected. (It should be noted that the only gun-related policy passed by President Obama was to allow unloaded guns in national parks and on Amtrak trains.) This has led to a dramatic rise in sales for major manufacturers in the industry and a coorelated rise in share price. Since August 2011, Smith & Wesson Holding Corp. (SWHC) has seen their shares rise 210% while competitor Strurm Ruger’s (RGR) shares are up 60%.
Although these companies have experienced an incredible rise over the last year, it appears now that gun sales are beginning to slow and many investors are betting sales will continue on a downward trend. On Wednesday, KeyBanc Capital Markets downgraded both of the aforementioned companies citing sales that they believe have peaked. Additionally, with four public shootings across America in the last month, the effect these events have on confidence in these companies is unpredictable. Beyond that though, a recent New York Times story detailed how more American’s are turning to Russia to purchase their rifles, citing them as simply being more reliable than anything made in the U.S.
Business Section: Investment Ideas
Whether or not you believe that guns should be harder to come-by, they have certainly been in the news lately. Based off of the fluctuation in share price recently, it is likely that a slowing in sales growth coupled with bad press has had a negative effect. How do you see gun sales trending in the near future? We compiled a list of the companies mentioned above along with a competitor.
1. Smith & Wesson Holding Corporation (SWHC, Earnings, Analysts, Financials): Offers metal processing services and manufactures firearms and handcuffs as well as apparel and sportsmen’s articles. Market cap at $561.84M, most recent closing price at $8.60.
2. Sturm, Ruger & Co. Inc. (RGR, Earnings, Analysts, Financials): Engages in the design, manufacture, and sale of firearms in the United States. Market cap at $869.67M, most recent closing price at $45.39.
3. Alliant Techsystems Inc. (ATK, Earnings, Analysts, Financials): Engages in the supply of aerospace and defense products to the United States government, allied nations, and prime contractors. Market cap at $1.65B, most recent closing price at $50.36.
Use the Turbo Chart to compare the performances of these stocks:
Written by Dan Connelly
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- Smith & Wesson Holding Corporation (SWHC, Chart, Download SEC Filings)
- Sturm, Ruger & Co. Inc. (RGR, Chart, Download SEC Filings)
- Alliant Techsystems Inc. (ATK, Chart, Download SEC Filings)
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