Last week, my Foolish colleague Rich Duprey led us on a detailed tour through President Obama's plan to outlaw the sale of 5.56 mm M855 "green tip" ammunition, also known as the .233 caliber, a type of round popular for use in the AR-15 sporting rifle which can also be used in AR-style pistols.
Critics of the round argue that it's "armor-piercing" and a "cop-killer." But defenders of the .233 caliber M855 respond that because body armor worn by police officers is designed to stop pistol bullets, any high-speed projectiles, when fired from a rifle, could potentially pierce an otherwise "bulletproof" vest.
The NRA fires back
Now, you might expect that to come as cold comfort to police officers -- who as a general rule prefer not to be shot at by rifles or pistols, armor-piercing or otherwise. According to FBI statistics, no police officer wearing a bulletproof vest has been killed by M855 ammunition at any time in the past decade.
For one thing, the idea that rifle cartridges can be used as ammunition in any pistol that's easy to conceal is just ludicrous. Here. Take a look at the M855 rifle cartridge as compared to a standard 9mm pistol round, and see for yourself:
Fact is, the M855 is about twice the length of a standard 9mm pistol cartridge. Simply put, no "pistol" that you'd recognize as such can hold a magazine big enough to accommodate such ammunition.
So it's not surprising that, when asked to comment on ATF's proposed regulation, Chris Cox, executive director of the National Rifle Association's Institute for Legislative Action, explains that "In 20 years, no .223 round has been used in a crime fired from a handgun platform to kill a police officer, or that penetrated a vest." Simply put, the ATF is trying to regulate a non-issue.
ATF in retreat
Faced with facts like these -- in addition to what the New York Times described as "more than 80,000 opinions," mostly negative, received by the Bureau of Alcohol, Tobacco, and Firearms in response to its invitation for comments on its proposed ammunition ban -- the ATF withdrew the President's plan to ban M855 ammunition last week, saying it will give the idea "more study" before taking any action.
But already, legislators in Congress are trying to force the issue. On the one hand, Representative Patrick McHenry (R-North Carolina) has introduced legislation that would specifically classify the .223 caliber M855 round and any other ammunition "designed, intended, and marketed for use in a rifle" as not "armor piercing," preventing its ban. (The U.S. Code, which understands that most bullets fired from a high-powered rifle will penetrate a bulletproof vest, restricts its definition of "armor-piercing ammunition" to only such rounds as can be fired from a handgun.)
Over on the other side of the aisle, House Democrats Jackie Speier (California) and Steve Israel (New York) are co-sponsoring a bill they call the Modernize Law Enforcement Protection Act, which will "block handguns from firing any sort of ammunition that can penetrate body armor worn by police officers."
Battle lines drawn
And so you see how the pro- and anti-gun lobbies have drawn up their positions. On the one hand, gun control advocates want to ban pistol ammunition capable of defeating a bulletproof vest. On the other, gun rights advocates want to "ban bans" of rifle ammunition altogether.
What's the likely result? The quick defeat of President Obama's plan to restrict the M855 by executive action probably foreshadows what will happen in Congress. In fact, by bringing this issue to the fore, gun control advocates may end up expanding access to ammunition by prompting gun rights backers to write into law an exemption of all pistol ammunition from regulation.
And this brings us to what all this means for investors. What we're looking at here, folks, is a double dose of good news for the guns 'n' ammo industry -- companies like Olin Corp (NYSE:OLN) and Orbital ATK (NYSE: ATK) that manufacture .223-caliber M855 ammunition, and manufacturers of guns that shoot the ammunition (both Sturm, Ruger (NYSE:RGR) and Smith & Wesson (NASDAQ:AOBC) make such AR-15 clones) alike.
On the one hand, any new legislation coming out of Congress is likely to make it easier to buy ammunition (potentially even short-circuiting efforts to, for example, restrict ammunition sales over the Internet). On the other hand, by "riling up the base," gun control advocates could very well spook gun owners into stocking up on even more guns 'n' ammunition -- "just in case."
Now, whether this new hiccup in gun regulation will be enough to transform actual AR-15 rifles into a good investment remains to be seen -- and history suggests that it will not. But as far as the guns 'n' ammo stocks go, I foresee this Congressional kerfuffle producing only good things for investors.