Finger on the trigger
Post-election, Smith & Wesson Holding (NASDAQ:SWBI) and Sturm, Ruger (NYSE:RGR) have stumbled, but 2016 has been a pretty good year to own gun manufacturers and personal defense stocks. Shares of Olin (NYSE:OLN), and Taser International (NASDAQ:AAXN) are both up 40% or more year-to-date, benefiting individual investors and the many mutual funds holding shares of weapons manufacturers in their portfolios.
While many view these companies as sin stocks, they're commonly found in many mutual funds, meaning you might also own a piece of Olin, Ruger, Smith & Wesson, or Taser, probably through an IRA, 401(k), or other retirement plan.
Depending upon how you feel about gun ownership, that may or may not be a problem, but for those who object to the presence of firearms in the home, they may not have even realize they're holding on to something they abhor.
Portfolios locked and loaded
According to data from Morningstar, widely held mutual funds from firms including Vanguard, Dimensional Fund Advisors, American Funds, and Fidelity are among the biggest holders of these weapon-maker stocks, though they don't necessarily own all of them or in substantial quantities.
For example, five Vanguard funds are the biggest holders of Smith & Wesson shares, but they come in second to Artisan Partners in Taser ownership and is third in Olin stock. Yet the Vanguard Total Stock Market Index is a top-five holder of all four weapons manufacturers, with shares of each representing about 2% of its total holdings.
|Top 5 Funds||Shares of SWHC||% of Total Shares Outstanding|
|Vanguard Strategic Equity Investor Shares||1,793,357||3.19%|
|Vanguard Small Cap Index||1,222,011||2.17%|
|Vanguard Total Stock Market Index||1,212,979||2.16%|
|Vanguard Small Cap Growth Index Investor Shares||689,472||1.23%|
|Vanguard Extended Market Index Investor Shares||634,182||1.13%|
|Top 5 Funds||Shares of RGR||% of Total Shares Outstanding|
|American Funds NVIT Growth II||565,288||2.98%|
|Vanguard Small Cap Index||413,162||2.18%|
|Vanguard Total Stock Market Index||398,700||2.10%|
|Vanguard Small Cap Growth Index Investor Shares||233,140||1.23%|
|Vanguard Extended Market Index Investor Shares||219,206||1.16%|
Olin is something of a conglomerate, making chemicals and epoxies, but it also owns the rights to the Winchester rifle brand name (the gun itself is made by Browning) while manufacturing Winchester brand ammunition that is used in both long guns and handguns.
Ammunition control is a new avenue for gun-control efforts, particularly where it comes to AR-style modern sporting rifles, which are one of the most popular semiautomatic rifles on the market. An outcry was raised last year when the Bureau of Alcohol, Tobacco, Firearms, and Explosives sought to ban so-called "green tip" bullets, which is the most popular type of ammo used in such rifles.
|Top 5 Funds||Shares of OLN||% of Total Shares Outstanding|
|CREF Stock Account R1||7,404,549||4.48%|
|iShares Select Dividend||4,561,046||3.07%|
|Vanguard Small Cap Index||3,595,494||2.18%|
|Vanguard Total Stock Market Index||3,418,495||2.07%|
|First Eagle Fund of America Y||2,531,289||1.53%|
The waters can also easily become muddied when looking at Taser, which manufactures weapons that primarily sell into the law enforcement market. While it also sells body cameras and evidence-management tools, the occasional misuse and abuse of the devices have raised concerns among many.
|Top 5 Funds||Shares of TASR||% of Total Shares Outstanding|
|Artisan Small Cap Investor||1,495,591||2.86%|
|Vanguard Explorer Investor Shares||1,071,666||2.05%|
|Lord Abbett Developing Growth A||1,049,341||2.01%|
|Vanguard Total Stock Market Index||868,523||1.66%|
Gun stocks ready to reload
More people now own guns than they have at any other time in recent history, with the Pew Research Center finding 44% of all U.S. homes having a gun in them. And more people are buying guns, too.
The FBI recently released its figures for October, showing that its NICS background investigation system for people wanting to buy firearms climbed to a record 2.3 million for the month. It's the 18th straight month the law enforcement agency has recorded all-time high investigations performed.
That demand creates a compelling case for individual investors and mutual funds.
Of course, there are dozens of other fund families owning shares in these gun stocks, too. The pervasiveness of these ownership stakes means it's possible you have shares of these companies in your portfolio, which is why it's important to look at a fund's holdings if you have an ideological opposition to owning certain types of companies.