Gun Stocks: Shooting Up

By Greg Guenther

Are you concerned about your financial future? Or maybe you’re worried that the world just isn’t safe anymore… If so, you’re not the only one. In fact, people across the country are feeding their fears by purchasing firearms.

Take Florida, for example. Floridians are applying for concealed weapons permits in record numbers — and the state government is buckling under the weight of a massive backlog of concealed weapons permits, according to the St. Petersburg Times. The state has even been forced to hire more than 60 temporary workers to deal with the flood of applications.

“Once the economy gets bad, crime always goes up,” a police officer told the St. Pete Times, “People get desperate whenever things are not going the way they feel like they should be going, and they’ll do things they normally wouldn’t do.”

Crime isn’t the only factor driving sales. In several news accounts, gun buyers have said they’re buying now because they fear stricter gun laws are inevitable under the new administration.

This gun craze is especially interesting since firearms have long occupied a relatively stagnant market space. Take rifle production, for example. From 1973-2005, the number of rifles produced each year decreased on average 3.8%. Shotgun production dropped on average 2.9% for the same period.

Revolvers have seen their production numbers dropping at an average of 4.6% a year. The only segment of the U.S. firearms industry that’s actually growing is pistols. Its growth is a 1.9% average each year- not much to get excited about.

However, sentiment is rapidly changing. And we think you should seriously consider firearms. No, we’re not advocating the purchase of guns. Instead, you should check out a couple of small-cap gun makers. These companies have withstood the test of time. Now, they’re enjoying more publicity and rising share prices…

First up is Smith & Wesson Holding Corp. (SWHC). This company has been making guns longer than any of us have been on the planet. It’s also a trusted brand that has expanded its offerings over the past few years…

After a tumultuous few years, this stock has posted a strong 2009. Shares are up about 80% since Jan.1.

The gun maker has big plans. Smith & Wesson has moved into the rifle market and wants to take full advantage of this expansion. In February, the gun maker announced it plans to nearly double its annual revenue and improve margins and market share over the next few years.

Sturm, Ruger & Co. (RGR) shares have enjoyed similar success this year. As of Friday morning, the stock is up almost 73% year-to-date (32% yoy). The firearms maker reported huge increases in revenue and backlog during Q4, and several analysts have upgraded this stock to a strong buy.

Ruger stock might even be too hot to handle right now. It’s posted most of its gains in just a few weeks. Short-term technicals show this stock is way overbought, so it might be best to wait for a pullback before jumping in.

Comments

[bearfund:]

Don't overlook rifles and shotguns. Yes, much of the growth has been in handguns and most of the current focus is on the personal protection market on the theory that people are worried about crime. But there are also a lot of savvy buyers out there looking for long guns, especially shotguns; they are excellent weapons for final defense and are also useful for obtaining food. Don't underestimate the importance of hunting, especially of small game in states with liberal laws. Expect to see a lot of unemployed people taking out their new long guns this fall and winter.

Mar 07 02:56 PM

[bigmoney:]

>> “Once the economy gets bad, crime always goes up,” a police officer told the St. Pete Times,

Firearms last a very long time, and I would imagine the market is fairly saturated. What percentage of the population already owns one firearm? And how many do they need?

As far as crime, and self protection go, I suspect the quality / integrity of the culture is a much more important safety factor than possessing a firearm. Would you rather live in a rich suburb unarmed, or in some nasty ghetto infested with gang-bangers and pitbulls, and your trusty S&W? A middle aged white collar office worker is not going to fare well against a gaggle of 18 year old gang-bangers who are unemployed, even with a concealed carry. He might get lucky and "defend" himself against some particular ambush / violation, only to find a whole community demand justice for the loss of their "honor student", who had a 1000 friends, a beautiful fiance, and a brilliant future.

Mar 07 06:37 PM

[Gun Money:]

My next gun purchase will be a M&P 40 cal. . I dont have any S&W pistols just a couple of revolvers. I like what S&W does and their quality. No offense to Ruger owners, but after he sold us out to the Klintoons, I'll never buy a Ruger!. How ever...... If I can make a few bucks I may buy some stocks and hold on to them long enough to make more Gun Money!!!!!

Mar 07 10:36 PM

[Rob Viglione:]

There's some serious uncertainty in the air, deteriorating economy, political discontent as we move more towards Socialism, and the American empire appears to be hovering over a precipice...of course people are buying firearms!

Mar 08 05:21 AM

[HTHTFH:]

Wasn't it S&W who sold out to the Clintons? The company went into the tank after they struck some kind of a deal that resulted in a de facto boycott by consumers and dealers. S&W never recovered until the company was bought back from its British parent company a few years later.



On Mar 07 10:36 PM Gun Money wrote:

> My next gun purchase will be a M&P 40 cal. . I dont have any
> S&W pistols just a couple of revolvers. I like what S&W
> does and their quality. No offense to Ruger owners, but after he
> sold us out to the Klintoons, I'll never buy a Ruger!. How ever......
> If I can make a few bucks I may buy some stocks and hold on to them
> long enough to make more Gun Money!!!!!

Mar 08 02:46 PM

[socphd71:]

I guess people are buying guns in anticipation of some cataclysmic event. Sooner or later, one of the following will occur:
(a) a cataclysmic event;
(b) few if any potential new customers believe that owning a gun will help them in the case of a cataclysmic even;
(c) the likelihood of a future cataclysmic event decreases.

In any cases, guns should then become a glut on the market. Those who buy stocks in gun companies need to keep a very close eye on the market, lest they face big losses.

Mar 08 03:51 PM

[Rangeman:]

Almost everybody at the rifle range has an AR15. They have become commonplace in everyone's gun collection. And, a lot of people own 3 and 4 AR15's. It is a person's first or 2nd gun purchase after buying a .22. Ruger does not make any AR15 platform. S&W M&P pistols are very popular with law enforcement. I don't see anyone shooting Ruger semiauto pistols.

Mar 09 11:08 AM

[PainfullyAware:]

Here in Phoenix there is almost no Ammo available and guns are in short supply. The only genera of gun still in bulk on the shelves are the Shotguns.

The Heard Is Fearful.

Gun Stocks and Private Prison Corporations will make a good amount of cash in the coming months.

Safety Is A Function Of Awareness.

Mar 09 08:05 PM

[User 387001:]

Im in ND and the popular rifle here is sks rifles.

Apr 01 01:07 PM