Gun sales, which have been high since Barack Obama was elected president, may have finally begun to fall. Sales of firearms, which peaked after the Newtown, Conn., school shootings plunged in January.
According to CNNMoney, FBI background checks, considered an accurate means of tracking gun sales, dropped "by a third in January compared to the year before. There were about 1.66 million background checks last month, and nearly 2.5 million in January the year before."
Why did gun sales increase?
The National Rifle Association, which, to put it lightly, supports gun ownership, has since before Obama's first presidential victory pushed the idea that Obama would restrict gun ownership. Though the president did little in his first term to change America's gun laws, the NRA continued to aggressively suggest he would do so in his second term.
In an article headlined "The election before the knock on your door," Dave Kopel wrote on the NRA's website about the group's fears.
"Is it possible that Obama is as sincerely anti-gun as his long pre-presidential record indicates," Kopel wrote. "That he was telling the truth in 1996 when he said he favored banning handguns, and in 2007 and 2008 when he said that he thought the Washington, D.C., handgun ban was constitutional? That he meant what he said in 1999 when he proposed shutting down every gun store in the inhabited portion of the United States—via a federal law that would ban all gun stores within five miles of a school or park?"
This line of thinking from the NRA -- that Obama would restrict gun sales -- got gun owners to buy more guns and led anyone considering buying one to do so. This has been good news for gun retailers like Cabela's (NYSE:CAB) and even better news for manufacturers including Smith & Wesson (NASDAQ:AOBC) and Sturm Ruger & Company (NYSE:RGR) .
How many guns are there?
The website GunFAQ reports that as of March 2013, based on consolidated information from the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives, there are about 300 millions guns in the United States. The NRA agrees with those numbers.
"The number of privately owned guns in the U.S. is at an all-time high, upwards of 300 million, and now rises by about 10 million per year," said the NRA's Institute for Legislative Action in a firearms safety fact sheet released Jan. 17, 2013.
Has the gun-buying boom ended?
Obama, if he wanted to make restricting gun ownership a priority, likely would have done so already, and the gun-buying public may now realize that they can wait to purchase firearms.
"Retail inventories, which had been in short supply last spring, have largely returned to normal now," wrote Rommel Dionisio, a gun industry analyst for Wedbush, as reported by CNNMoney. "Monthly comparisons have recently turned sharply negative, a trend we expect to last through at least May or June 2014."
According to Dionisio, the "feared tightening of gun control legislation," which supported the boom in gun purchasing, has subsided.
Making guns is still a pretty good business
While people are no longer stripping the shelves of their local gun purveyor out of fear that the president will repeal the second amendment, guns are still selling well.
"Our adjusted National Instant Criminal Background Checks System data show that while sales have receded from the peaks of 2013, they are still ahead of 2012," National Shooting Sports Foundation Public Affairs Director Mike Bazinet told the Fool. "So, for example, December 2013 was the second highest December ever. The same is true for January 2014 -- down from January 2013 but still the second highest January. So we have come down from the peak but the valley floor is higher than before November 2012. The consumer base has grown."
According to Bazinet this growth is because about 25% of gun purchases are made by first-time buyers. "We have seen large increases in the number of first-time woman buyers who not only are seeking a firearm for personal protection but are finding that they enjoy target shooting as a group activity," he said.
Prospects for the gun business
While the gun-buying public may believe that Obama won't be able to regulate firearms purchases, the U.S. has a presidential election coming up in 2016. With Hillary Clinton as a possible candidate for the Democrats, it seems probable the drums will once again beat for people to stockpile guns now before President Clinton sends her liberal, gun-hating goon squad to take them away.
It seems that for the firearms industry, the threat of a liberal who might attempt to regulate guns is a sales tactic that moves product.
Daniel Kline has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.