Trend: Sales of guns and ammunition, along with background checks and applications for gun carry permits, have increased greatly since November 2008.
Guns and ammunition become more valuable when uncertainties and anxieties increase. Americans have been stocking up on guns since November 2008, with corresponding gains in the stock prices of Ruger (RGR) and Smith & Wesson (SWHC). The big question for investors is: Has the trend run its course or will it continue?
Link: Boom in Gun Sales Fueled by Politics and the Economy - TIME.
According to the SportsOneSource, a research firm that tracks the sporting-goods industry, firearms sales in large retail outlets are up 39% this year. Shops across the country are reporting ammunition shortages because stores can't meet demand for bullets. Data from the FBI's National Instant Criminal Background Check System, which the industry uses as a proxy for overall firearms sales, are also revealing. From November 2008 through March 2009, FBI background checks, which are required every time a federally licensed gun dealer makes a sale, rose 29.3% over the same period a year earlier. In November alone, checks jumped 42%, to 1,529,635, the largest monthly total in the decade that the system has been in place. "Consumer demand is unprecedented," says Larry Keane, general counsel for the National Shooting Sports Foundation, a trade association for the firearms and ammunition industry.
Two factors are fueling the rise. The first is political. It's no coincidence that a record number of background checks occurred in November, the month Barack Obama was elected President and the Democrats took control of Congress. People grew anxious that the Obama Administration would ban semiautomatic weapons, so they rushed to buy guns before legislation could be passed. In a December survey by the research firm Southwick Associates, nearly 80% of active hunters and target shooters said they believed firearm purchases would "become more difficult" under the new Administration and a Democratic Congress.
The last Democratic President, Bill Clinton, put into law an assault-weapons ban in 1994. President George W. Bush allowed that ban to expire, but last month Obama's Attorney General, Eric Holder, said the Administration wanted to reinstate Clinton's ban. "The gun culture is hypersensitive," says Miles Hall, an Oklahoma City gun-shop owner. "If someone sneezes in Washington, we hear it and get nervous. There's a lot of anxiety out there."
A new market of gun buyers is emerging. Hall estimates that some 80% of his sales since the election have been to first- and second-time gun purchasers, many nervous that this may be their last chance.
Link: One Way to Invest in Social Unrest -- Seeking Alpha
The two major public gun makers are Smith & Wesson (SWHC) and and Sturm, Ruger, & Co (RGR). The latter has the better balance sheet but in this world where fundamentals no longer matter - buy the more speculative fare and chuckle to self. So I'm going with SWHC, starting with a 1.3% stake on the pullback to the 20 day moving average $5.50. I am hoping for a more serious pullback as these stocks have had enormous runs - but then again, what hasn't.
Link: Gun Shop Owner Links Ammo Shortage To Obama : NPR.
An ammunition shortage in the U.S. is affecting police and sheriffs' departments all over the country, as well as gun dealers, from big retailers like Wal-Mart to smaller family-run businesses and online operations. Ammunition suppliers say the shortage is due to several factors, including the sheer volume of ammunition heading overseas to fight wars in Iraq and Afghanistan. But they also say the shortage — as well as a sharp rise in gun sales — coincided with the election of President Obama, fueled by fears his administration would usher in more restrictive gun laws.
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