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Seeking Alpha: Best 4 Gun Stocks to Buy Amid Fears of More Regulation

Seeking Alpha: Best 4 Gun Stocks to Buy Amid Fears of More Regulation
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By    |   Friday, 04 March 2016 07:11 AM


The uncertainty surrounding the political composition of the Supreme Court and its impact on any additional gun control legislation has fostered a good time to buy four certain gun-related stocks, Seeking Alpha reports.

President Obama early this year unveiled executive order aimed at tightening gun regulations, following a spate of mass shootings.

"However, his ability to unilaterally impose gun control regulations is highly limited. He has virtually no chance of getting gun laws through a Second Amendment-friendly Congress," Seeking Alpha’s Greg Miller explained.

"But the recent death of U.S. Supreme Court Justice Antonin Scalia offers a chance to shift the terms of the debate significantly. Now, with Scalia gone, it's all but certain that his replacement will be a less ardent defender of Scalia's reading of the Second Amendment," he wrote.

Since Scalia's death, shares in gun-related companies are up between 9% and 13.5%.

Miller recommends the best four gun stocks amid the additional uncertainty:
  • Smith & Wesson Holding Corporation (NASDAQ:SWHC). "Smith & Wesson has enjoyed 9% annual revenue growth over the past five years, even after a 15% decline last year because of its excess inventory. It sells only guns, ammunition, and related enforcement accessories such as handcuffs and training academies for police departments. But it doesn't manufacture ammunition, nor does it have a line of shotguns, both of which are key beneficiaries of the increase in sports shooting," he wrote.
  • Sturm, Ruger & Co. (NYSE:RGR). Sturm, Ruger & Co. sells only firearms and only under the Ruger name. "Like Smith & Wesson, handguns dominate the company's sales and it lacks an ammunition division or a shotgun offering.While both of these companies offer good potential for investors, Smith & Wesson has handily outperformed Sturm, Ruger & Co. over the last five years… and still only trades at half of Sturm's valuation."
  • Vista Outdoors Inc. (NYSE:VSTO). "Spun off from Alliant Techsystems early last year, Vista makes Federal Premium and other lines of ammunition, plus Savage Arms long guns," he explained.
  • Olin Corp. (NYSE:OLN). Olin makes Winchester ammunition under license. "However, the company has invested heavily in its other businesses, primarily chlorine-related chemical products, so only 12% of the company's sales are firearms-related," he wrote.
    Miller thinks Vista is the best firearms investment choice because of the company’s involvement in shooting sports (Vista has a line of high-end shotguns tailored to clay, skeet, and trap shooting) and the company’s overall diversification, citing as an example its acquisition of other outdoor-sports-related businesses.

    Meanwhile, Obama himself might seem an unlikely investor in the firearms industry.

    But the U.S. president, a fierce advocate for gun regulation, has money in a pension fund that holds stock in gun and ammunition companies.

    Although Obama’s stake is minuscule, worth no more than $30, it reflects a much larger surge of investment.

    The president is among millions of Americans buying into gun companies — often unwittingly — as mutual funds have increased such holdings to record levels, according to a Reuters analysis of institutional investment in firearms companies.

    Since Obama was elected in 2009, mutual funds have raised their stakes to about $510 million from $30 million in the nation’s two largest gun manufacturers with publicly traded shares, Smith & Wesson and Sturm, Ruger & Co. That means such stocks are now common in retirement and college savings plans.

    The influx has helped to boost both companies' shares by more than 750 percent during the Obama presidency; each now has a market value of about $1 billion.

    Beyond mutual funds, such investments also are held in the portfolios of hedge funds and public pension plans, which are harder to track.

    (Newsmax wire services contributed to this report).

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The uncertainty surrounding the political composition of the Supreme Court and its impact on any additional gun control legislation has fostered a good time to buy certain gun-related stocks, Seeking Alpha reports.
gun, stocks, firearms, investors
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2016-11-04
Friday, 04 March 2016 07:11 AM
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