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Mark Gomes, PTT Research (1,255 clicks)
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The political push for new gun control measures continues to spur heightened demand for firearms. My company, Pipeline Data, estimates that February data will show there were 2,200,000 background checks done through the FBI's National Instant Criminal Background Check System (NICS).

This number will represent just a slight decline from the 2,495,000 checks performed in January. That was the second highest total on record (December was the highest with 2,784,000 checks). If accurate, February's figure will represent a 26% increase over February 2012, exceeding the 19% growth rate for all of 2012.

If you think this is bullish for Sturm, Ruger & Co (RGR) and Smith & Wesson Holding Corporation (SWHC), hold your horses - there's a little bear in the room.

As you can see from the chart below, annual growth fluctuated throughout the year until September. After that month's 16% increase, growth steadily accelerated for several consecutive months. October came in at 20%. November's growth was 31%, followed by a 49% increase in December.

NICS Background Checks

2011

2012

Growth

JAN

1,323,336

1,377,301

4%

FEB

1,473,513

1,749,903

19%

MAR

1,449,724

1,727,881

19%

APR

1,351,255

1,427,343

6%

MAY

1,230,953

1,316,226

7%

JUN

1,168,322

1,302,660

11%

JUL

1,157,041

1,300,704

12%

AUG

1,310,041

1,526,206

17%

SEP

1,253,752

1,459,363

16%

OCT

1,340,273

1,614,032

20%

NOV

1,534,414

2,006,919

31%

DEC

1,862,327

2,783,765

49%

Totals

16,454,951

19,592,303

19%

2013 started where 2012 left off. In fact, January's 2.5 million checks represented a climactic 81% spike over January 2012. But as you can see in the following chart, we believe February's data will show a precipitous deceleration in growth:

NICS Background Checks

2012

2013

Growth

JAN

1,377,301

2,495,440

81%

FEB

1,749,903

2,212,855

26%

Equally troubling news can be seen in the chart below. It depicts January-to-February growth going back to the year 2000. It may come as a surprise to many, but February is usually a stronger month for background checks than January. We believe that changed this year. If we're right, February will be a weaker month than January for the first time since the turn of the century.

NICS Background Checks

YEAR

JAN

FEB

CHANGE

2000

639,972

707,070

10%

2001

640,528

675,156

5%

2002

665,803

694,668

4%

2003

653,751

708,281

8%

2004

695,000

723,654

4%

2005

685,811

743,070

8%

2006

775,518

820,679

6%

2007

894,608

914,954

2%

2008

942,556

1,021,130

8%

2009

1,213,885

1,259,078

4%

2010

1,119,229

1,243,211

11%

2011

1,323,336

1,473,513

11%

2012

1,377,301

1,749,903

27%

2013

2,495,440

2,212,855

-11%

Make no mistake - 2.2 million background checks are nothing to sneeze at. With a hefty backlog of firearm demand, RGR and SWHC will be busy for some time to come. However, stocks are often swayed by momentum and expectations. We believe that February's figures will show that momentum took a breather. If the consensus called for something more, both stocks could come under pressure with the release of the FBI's official figures, which should be imminent.

Source: FBI Firearm Background Checks To Top 2M In February