Revolvers in the Smith & Wesson booth at the 144th National Rifle Association Annual Meetings and Exhibits at the Music City Center in Nashville, Tenn., on April 11.Daniel Acker/Bloomberg
Here's a surefire investing strategy, even for a troubled stock market: Every time there's a mass shooting in the United States or a politician muses about making it a teensy bit more complicated to acquire deadly weapons, load up on the shares of the publicly traded firearms manufacturers.
U.S. gun and ammo sales always shoot up after a murderous rampage. The driver is fear of becoming the next unarmed victim or fear of a meddling government denying Americans their right to bear enough firepower to take down a charging rhino in the parking lot of their favourite shopping mall.
With more than 350 incidents of multiple shootings in 2015, it should come as no surprise that the gunslingers posted strong sales and healthy profits, and easily outperformed the flagging market. Shares of Smith & Wesson Holding Corp. soared 132 per cent last year. Sturm Ruger & Co. Inc. also bucked market trends, up 72 per cent. Olin Corp. owns the famous Winchester brand, but it is also a major chemical and materials producer, so it hasn't been popular with investors looking to capitalize on the profitability of violence.
This, in fact, has proved a far better bet than relying on such portfolio stalwarts as Apple (off 4.6 per cent last year) or Warren Buffet's Berkshire Hathaway (down more than 12 per cent) to stay afloat in a storm-tossed sea.
The gun makers have made steady gains over the past half decade, despite an aggressive campaign by well-organized opponents to persuade pension and other institutional investors to divest such equities. It's a lot easier to get managers to dump slumping coal stocks than to unload one of their few big winners in a tough market.
Not even a more robust anti-gun lobby – which has been deploying its rising tide of donations to win a slew of state-level skirmishes against the mighty National Rifle Association – has been able to make a dent in consumer demand.
Indeed, as a frustrated and emotional U.S. President Barack Obama revealed his modest gun-control plans Tuesday, Sturm Ruger hit a new high. Smith & Wesson rode the same wave, jumping 11.5 per cent after raising both its sales and profit targets for its third quarter ending Jan. 31, as well as for the fiscal year.
It's an irony not lost on the weapons industry. Every time the call goes out for even modest gun reforms, such as more thorough background probes, customers flock to their nearest purveyors.
Having given up all hope of getting any gun-control legislation through the U.S. Congress, Mr. Obama is resorting to executive actions to widen criminal background checks on some gun purchases and better enforce existing laws requiring licences for those who make a business of selling online or through gun shows.
But the many dealers who get around such restrictions – and the need for background checks – by claiming to be hobbyists selling to other collectors are unlikely to be affected much. Simply removing the weapons from their original packaging and refraining from handing out business cards could do the trick. And the manufacturers will keep churning out fat gains.
Not even the Obama-haters in Republican ranks could bring themselves to get too worked up about the moves. "Ultimately, this executive guidance is only a weak gesture, a shell of what the President actually wants," Kevin McCarthy, Republican majority leader in the House of Representatives, said. This, after earlier warning that Mr. Obama's intervention "poses a grave threat" to the legislature's role.
The truth is that having a gun control-seeking Democrat in the White House has been awfully good for business, as Smith & Wesson once crowed in a filing: "We experienced strong consumer demand for our firearm products following a new administration taking office in … 2009."