With the San Bernardino shooting still fresh in the minds of many American's, not to mention a large number of other mass shootings over just the past few years, politicians running for both state, local and Federal offices this election season have been clear which side of the gun control debate they stand on.
Regardless of whether you believe there should be tougher laws placed on firearms and ammunition in this country, one fact remains, there is no such thing as bad press for the gun business. In the four days following the San Bernardino shooting, gun sales in the state of California jumped from 12,649, during November 29 to December 2, up to 20,664. Furthermore, during the first 11 months of 2015, more than 1.51 million federal background checks for gun purchases had been performed in the state, a figure above the full 2014 count of 1.47 million.
But it's just not mass shootings are good for gun sales. Recent surveys show that American's are buying guns not just to protect themselves from others whom have weapons, but to ensure they can get the guns, accessories, and ammunition they want before politician's change current laws. And that idea of getting ahead of possible regulation is likely to get stronger the closer we get to November 8, 2016, the general Presidential Election date.
When President Barack Obama was elected for the first time in 2008, gun sales jumped nearly 50%, compared to the same time the previous year, during the first week after the elections. If another Democrat is elected into the White House come November, or the Democrat's take back Congress, we could likely see another big jump in gun sales at the tail end of this year. But regardless of whomever wins the White House or controls Congress, the fact remains, we have nine months until the general elections, countless more debates, TV or radio ads, speeches, rallies; during which time we will likely continue to hear the debate go back and forth about what should be done about gun laws. While the arguing back and forth may not worry some current or potential gun owners, it's certainly going to scare a few into buying more weapons, ammunition and accessories.
And that's where the investing opportunity comes in. Don't sit back and wait until September or October to buy the gun stocks, buy them today, ahead of the pack.
The obvious go to gun stocks are going to be Sturm, Ruger & Co. Inc. (NYSE:RGR) and Smith & Wesson Holding Corporation (NASDAQ:SWHC). Although these are the only two pure-play US gun companies investors can buy, but that's not a bad thing. Over the past 12 months RGR is up more than 47% while SWHC is up nearly 80% and with the political catalyst over the next nine months, there is no reason both couldn't continue their performance considering they are trading at 17 times and 14 times future earnings respectively.
Some stocks that would still give investors a taste of the gun industry, but not completely tied to it would be companies like Cabela's Incorporation (NYSE:CAB) or Dicks Sporting Goods Inc. (NYSE:DKS). Both companies sell a large amount of firearms and see increases in sales figures when gun sales nationwide increase. But, since these sporting goods retailers sell items other than just weapons, they offer a little more safety and upside if gun sales don't rapidly increase in the coming months.
The other way to play the gun industry would be through an Exchange Traded Fund. But, while there are three quality Aerospace and Defense ETF's; iShares U.S. Aerospace and Defense ETF (PACF:ITA), PowerShares Aerospace & Defense ETF (PACF:PPA), and SPDR Aerospace & Defense ETF (PACF:XAR), currently only the ITA owns shares of both Smith & Wesson and Sturm, Ruger Co. Now while the ETF may not give you as direct exposure to increasing gun sales, it will also lessen your general investing risk, which is never a bad thing.
At the end of the day, some investors may not be comfortable owning a gun themselves or even buying certain types of sin stocks. And while there is nothing wrong with that, investors who don't mind investing in less than glamourous business's may be able to make some easy money by simple thinking about where the market will likely be heading in the future and front running those moves today. History repeats itself time and time again, and while we certainly don't want to see another mass shooting in the U.S. or abroad, just the simple act of politicians debating over guns laws and American's becoming fearful their rights could be dampened, will likely be enough to increase gun sales in the coming months, if not longer.
Matt Thalman
INO.com Contributor - ETFs
Follow me on Twitter @mthalman5513
Disclosure: This contributor held long positions in Apple, Tesla, Intel, Google, Amazon.com, Facebook, Priceline and Microsoft at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
I wonder if you would write this article if you were one of the parents of a victim of one of the many school shootings that have occurred in your country.
I'm sorry but your comment makes little sense. The article clearly states that it doesn't matter what your belief on gun control is. It is about an investment strategy. If the article was about a play on auto investments and I knew someone who died in a car wreck should I be offended, or if the article was about a drug company and I knew someone who died from medical complications should I look away. P C has gotten way to out of control for my taste.
You are missing the point. Dying in an auto accident is not the same as being murdered. While you're at it, why don't you cheerlead for war as well and recommend purchasing weapons manufactures' stock of all kinds -- Let's invest in land mines, bombs, drones and missile manufacturers. Morally ambiguous investments of this type help keep the whole dysfunctional military juggernaut rolling along. But hey you're probably cool with that too.
I am glad neither I nor my family has to rely or either Konrad Wassenaar or Lord Koos for protection. While they attribute evil to the inanimate object instead of the actions person using it they promote a fantasy that eliminating all guns will eliminate the evil actions. So you try to shame others to believing your foolishness by becoming offended at the very mention of the inanimate object. I hope you and your family are spared but if evil ever does find you, think how you will feel if they are murdered in front of you and you are not prepared to protect them? I was in law enforcement for over sixteen years and survived two close shooting incidents. I will tell you this, the criminals do not care about gun laws nor do they care about your opinions.
Hello Konrad Wassenaar,
Thank you for reading and for commenting. I understand were you are coming with asking such a question and as fellow reader Larry Simms pointed out, and as I mentioned in the last paragraph of the article, I know not all investors are comfortable with owning gun stocks or just what are called 'sin' stocks in general, (casino, alcohol, tobacco, etc). And that is perfectly fine if you don't want to be involved in owning those stocks. Furthermore, I fully understood that this article would perhaps rub some readers the wrong way, as this is certainly a hot button topic and because I have written about gun and 'sin' stocks in the past.
But, the purpose of this article and all the articles I write is simply to inform the general investing community about possible invests and why I believe they could be profitable, not to offend anyone. If you or anyone else doesn't agree with my analysis or reasoning, great, let's talk about it and hopefully we can both learn something.
Lastly, I apologize if this article offended you or anyone else that may read it, that was not my intention. I am simply trying to point out to possible investing opportunities and attempting to do that with an open mind and non-bias view.
Happy investing,
Matt Thalman
I asked a simple question and received an answer that neither is a YES or a NO.
Kind regards.. Konrad Wassenaar.
Hello Again Konrad Wassenaar,
I apologize that I didn't give you the answer you are looking for, but honestly I can't answer that question with a simple 'yes I would still write it' or 'no I wouldn't write the article' because fortunately I am not a parent of a child who has been the victim of a shooting. So, I truly do not know how I would react to a terrible thing like that occurring.
Again, the intended purpose of the article was to point out a possible investing opportunity to those investors who may be interested, nothing more.
Happy investing,
Matt Thalman