Why Gun Stocks Shot Up

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of gun makers Smith &Wesson (Nasdaq: SWHC  ) and Sturm, Ruger (NYSE: RGR  ) were on target for investors today, gaining as much as 20% and 11%, respectively, after Smith & Wesson released fiscal-fourth-quarter results.

So what: For the quarter, Smith & Wesson's sales soared 28% to $130 million, while income from continuing operations per share fished at $0.27, up from $0.07 a year ago. Wall Street was expecting revenue and per-share profit of $129 million and $0.17, respectively. The company said that an expanding user base -- particularly among women -- as well as concerns about the upcoming election fueled the strong quarter.

While good times for Smith & Wesson don't guarantee similarly strong performance out of Sturm, Ruger, investors are probably right to be excited since the company can reasonably be expected to benefit from the same trends that Smith & Wesson has been seeing.

Now what: As we look ahead to the presidential elections at the end of the year, it's probably not crazy to think that another term for Barack Obama would be the better outcome for gun companies like Smith & Wesson and Strum, Ruger. To date, Obama has not cracked down on gun control the way many expected, but those expectations linger. Obviously, if President Obama were to take drastic steps during his second term, that would be a bad outcome, but even if that never came to pass, the expectation of it could continue to drive gun sales through the second four-year term. Perhaps a counterintuitive way to think about it, but it's hardly a far-fetched scenario.

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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

Read/Post Comments (6) | Recommend This Article (5)

Comments from our Foolish Readers

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  • Report this Comment On June 29, 2012, at 11:19 PM, GETRICHSLOW2 wrote:

    If obummer gets a second term, gun owners are screwed! He is smart enough to know gun control has been a brutal election loosing issue for liberals. He is just waiting until he has nothing to loose and then look out!!

    On the positive side, it would likely create the second largest black market right behind drugs. This would be the only good thing he done for the economy. After all, attempting to control drugs has worked out so well, might as well try it with guns too!

  • Report this Comment On June 30, 2012, at 4:23 AM, benyboy wrote:

    Obama never ever tried to prevent people from buying guns, and what wrong with giving americans free health care??? if your mom was sick and you could not afford to treat her, wouldn't you like to have some help?.. Obama 2012 ...

  • Report this Comment On June 30, 2012, at 4:50 PM, GregKS wrote:


    I will try to be Foolishly correct, and only ask where in the world you think there is anything free about healthcare. The first thing I think about is the 3+% tax on dividends to fund this monstrosity. Then there is the tax on medical appliances which will be passed on to the purchasers of said appliances. Then ask yourself about the tax on not having health insurance. Healthy people do not need health insurance, yet they will be forced to either purchase health insurance, or pay a tax (penalty) for not having health insurance. Finally, I will ask a politically incorrect question as to when health care became a "right" as opposed to a life option.

    As far as purchasing guns, please cite references. I can only think about "Fast and Furious" which has resulted in 200+ Mexican deaths and at least one US death, Border Patrol agent Brian Terry.

    Ben, please remember that socialism is the best system of government only until it runs out of other people's money, and has never worked in all of world history.


  • Report this Comment On June 30, 2012, at 5:14 PM, GregKS wrote:


    Since I'm retired, I forgot about Medicare taxes on salaries. The following is cut and pasted from the IRS site. Do the math, and you will find that there is a 12.4% tax on wages for healthcare.

    "Free" healthcare? I don't think so.


    Social security and Medicare tax for 2012. The employee

    tax rate for social security is 4.2% on wages paid

    and tips received before March 1, 2012. The employee tax

    rate for social security increases to 6.2% on wages paid

    and tips received after February 29, 2012. The employer

    tax rate for social security remains unchanged at 6.2%.

    The social security wage base limit is $110,100. The Medicare

    tax rate is 1.45% each for the employee and em-

    Get forms and other information ployer, unchanged from 2011. There is no wage base limit

    faster and easier by: for Medicare tax.

  • Report this Comment On June 30, 2012, at 5:17 PM, GregKS wrote:

    Oops, Medicare tax is "only" 2.9%. Still, do the math.


  • Report this Comment On July 01, 2012, at 10:44 PM, Gyre07 wrote:

    Obama has shown absolutely zero inclination to piss off gun nuts. He's plowed more $$$ into the military than Bush did, with substantially less reason. He's taken Bush's act, and upped the ante in just about every possible way. This is nothing more than raw, unadulterated marketing of the extremely unlikely to completely paranoid fools. Of which, we have way more than our share.

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