Guns Remain a Fortress for Your Portfolio

A fellow investor once tweeted to me, "Guns and prisons all day." While it sounds like a bumper sticker in Alabama, it was a reference to stocks. The latter might not be as bulletproof a thesis as it once was, given that there is evidence that U.S. prison populations are declining, but the former is still right on target. Gun stocks seem to thrive in two polar scenarios: when there is fear guns are going away, and when it looks like guns are here to stay. The most recent example is Smith & Wesson (NASDAQ: SWHC  ) , which hit record sales amid fierce gun control debates in Washington.

Above target
For Smith & Wesson's fiscal fourth quarter, the company came in slightly ahead of Wall Street's expectations on both top-line revenues, and bottom-line earnings. Top-line sales hit $178.7 million -- a record for the company, and about $2.1 million ahead of consensus estimates. The number also represents a 38% gain over the prior year's quarter.

On the bottom line, non-GAAP EPS came in at $0.44 per share -- 63% higher than 2012's fourth quarter, and $0.01 over analyst expectations. Margins improved across the board.

The gunmaker booked its sales boom based on a now-familiar thesis: People buy (lots) of guns when they are worried that they are going to be taken away. Even though the final version of the once-strict gun control bill passed with little effect on the average gun owner, the discussion leading up to it was enough to scare people into the gun stores, arming up Charlton Heston style.

The perfect stock?
Despite frequent outcries for change, America's love of guns seems to persevere. According to a recent report, it's not that more and more Americans are choosing to become gun owners, but that existing gun owners are just buying more guns. Aside from becoming the most popular house in the neighborhood in the event of a zombie apocalypse, these buyers are the perfect customer for companies like Smith & Wesson, or Sturm, Ruger, & Co. (NYSE: RGR  ) . They are constantly worried that the government will nix access to handguns and automatic weapons, and panic-buy as many as they can.

Since the beginning of Obama's first term, Sturm, Ruger's stock has gone absolutely bananas -- up more than 700%. Smith & Wesson is up more than 400%, though with more volatility.

It may not be the most socially conscious investment, or anywhere close, for that matter, but guns are a big, growing business in the United States.

As a recent Forbes article points out, the best time to own stocks is during debate -- whether to tighten or loosen the grip on guns. The mellower the conversation becomes, the softer the sales. And, though the gun debate has tapered off in recent months, it is still a hot topic on many politicians' "to eventually do something about" list.

Even after pushing through incredible sales and stock gains, these companies may still shoot higher, yet.

 

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  • Report this Comment On June 29, 2013, at 12:27 AM, lorenzoj wrote:

    Please..... when will people who do not know firearms but choose to write about them have their work fact checked by someone who actually does. The financial may be accurate but several statements are not. One example is the reference to "automatic" weapons which have essentially been illegal to own since about 1934 except under a highly restrictive and very expensive permitting process unavailable to most private individuals. Sorry but it just promotes the acceptance as fact of numerous myths regarding firearm ownership in this country

  • Report this Comment On June 29, 2013, at 4:11 AM, stevmg wrote:

    Selling guns at a record pace to Neanderthal idiots who don't know how to use them. We have come a long way in our development. The murder of twenty babies in CT is less important than the right for ANY idiot to get a gun unfettered and have the right to use it anywhere.

    This country may get the en masse Darwin Award for rank stupidity.

  • Report this Comment On June 29, 2013, at 5:40 AM, pookie8me wrote:

    FYI

    WORLD MURDER STATISTICS

    From the World Health Organization:

    The latest Murder Statistics for the world:

    Murders per 100,000 citizens.

    Honduras 91.6

    El Salvador 69.2

    Cote d'lvoire 56.9

    Jamaica 52.2

    Venezuela 45.1

    Belize 41.4

    US Virgin Islands 39.2

    Guatemala 38.5

    Saint Kits and Nevis 38.2

    Zambia 38.0

    Uganda 36.3

    Malawi 36.0

    Lesotho 35.2

    Trinidad and Tobago 35.2

    Colombia 33.4

    South Africa 31.8

    Congo 30.8

    Central African Republic 29.3

    Bahamas 27.4

    Puerto Rico 26.2

    Saint Lucia 25.2

    Dominican Republic 25.0

    Tanzania 24.5

    Sudan 24.2

    Saint Vincent and the Grenadines 22.9

    Ethiopia 22.5

    Guinea 22.5

    Dominica 22.1

    Burundi 21.7

    Democratic Republic of the Congo 21.7

    Panama 21.6

    Brazil 21.0

    Equatorial Guinea 20.7

    Guinea-Bissau 20.2

    Kenya 20.1

    Kyrgyzstan 20.1

    Cameroon 19.7

    Montserrat 19.7

    Greenland 19.2

    Angola 19.0

    Guyana 18.6

    Burkina Faso 18.0

    Eritrea 17.8

    Namibia 17.2

    Rwanda 17.1

    Mexico 16.9

    Chad 15.8

    Ghana 15.7

    Ecuador 15.2

    North Korea 15.2

    Benin 15.1

    Sierra Leone 14.9

    Mauritania 14.7

    Botswana 14.5

    Zimbabwe 14.3

    Gabon 13.8

    Nicaragua 13.6

    French Guiana 13.3

    Papua New Guinea 13.0

    Swaziland 12.9

    Bermuda 12.3

    Comoros 12.2

    Nigeria 12.2

    Cape Verde 11.6

    Grenada 11.5

    Paraguay 11.5

    Barbados 11.3

    Togo 10.9

    Gambia 10.8

    Peru 10.8

    Myanmar 10.2

    Russia 10.2

    Liberia 10.1

    Costa Rica 10.0

    Nauru 9.8

    Bolivia 8.9

    Mozambique 8.8

    Kazakhstan 8.8

    Senegal 8.7

    Turks and Caicos Islands 8.7

    Mongolia 8.7

    British Virgin Islands 8.6

    Cayman Islands 8.4

    Seychelles 8.3

    Madagascar 8.1

    Indonesia 8.1

    Mali 8.0

    Pakistan 7.8

    Moldova 7.5

    Kiribati 7.3

    Guadeloupe 7.0

    Haiti 6.9

    Timor-Leste 6.9

    Anguilla 6.8

    Antigua and Barbuda 6.8

    Lithuania 6.6

    Uruguay 5.9

    Philippines 5.4

    Ukraine 5.2

    Estonia 5.2

    Cuba 5.0

    Belarus 4.9

    Thailand 4.8

    Suriname .6

    Laos 4.6

    Georgia 4.3

    Martinique 4.2

    And...................

    The United States 4.2 !!!!!!!!!!!!

    ALL the countries (109) above America have 100% gun bans.

    It might be of interest to note that

    SWITZERLAND (not shown on this list)

    has NO MURDER OCCURRENCE!

    However, SWITZERLAND'S law requires that EVERYONE....

    1. Own a Gun

    2. Maintain Marksman qualifications....regularly

    3. "Carry"........a Weapon.

    We never hear about this?

    I am not surprised, because this does not advance the Liberals' Agenda.

  • Report this Comment On June 30, 2013, at 1:45 AM, p8ryot wrote:

    As much as I dislike the POTUS agends's one cannot deny that he's been a great motivator in gun sales. If only the Liberals would spread that fact.

  • Report this Comment On July 03, 2013, at 11:09 AM, jeffbox1 wrote:

    At a local shooting range i use there is a large gun store. I've been visiting he place or years.

    About 3 months ago, the gun inventory was severely depleted over what i am used to seeing. Yesterday, the shelves were overflowing with inventory and many items were on sale.

    If widespread, the channel is getting overstuffed and will lead to a stock price reduction.

    Others might visit their local stores and compare. Mine is in dallas.

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