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WSJ: Funds Stick With Stocks of Gun Companies

WSJ: Funds Stick With Stocks of Gun Companies
(Patricia Hofmeester/.Dreamstime)

By    |   Wednesday, 06 November 2019 05:24 PM

U.S.-based open-end mutual funds and exchange-traded funds reportedly own nearly a third of the stock in America’s two publicly traded gun companies, even as Main Street investors are avoiding such shares.

The only two remaining gun-company stocks in the U.S. are Sturm Ruger (RGR) and American Outdoor Brands Corp. (AOBC), owner of gun maker Smith & Wesson.

Funds hold about 30% of the two companies’ combined shares, according to data compiled in late October for the Wall Street Journal by fund tracker Morningstar Inc. There are some 201 funds invested in one or both of the companies, mostly small-cap funds, reflecting the companies’ market capitalization.

In the wake of numerous mass shootings, the number of investors asking to screen out gun stocks from their portfolios “has noticeably increased over the last few years,” Andrew Wetzel, portfolio manager at F.L. Putnam Investment Management Co., a New England advisory with more than $2.2 billion under management, told WSJ.com.

Gun company stocks typically trade higher after mass shootings as consumers may step up purchases to get ahead of potential regulatory changes that could make it more difficult to obtain guns.

Investor scrutiny of gun makers picked up after last year’s mass shooting at a Florida high school and has continued through more recent attacks, including in Texas and Ohio in August.

Several large banks last year limited financing for gun makers and retailers, but the move had little impact on an industry whose many small manufacturers are able to tap other sources of credit, Reuters explained. 

At gun maker annual meetings last year, top asset managers voted in favor of shareholder calls for safety reports, but also backed directors.

At its annual shareholder meeting this fall, American Outdoor, parent of Smith & Wesson, will face a shareholder call for the company to adopt a “human rights” policy the company says is vague and could expose it to liability.

Morningstar director Jon Hale said worried investors could relax about gun makers that make up tiny fractions of big index funds, which account for most of the gun makers’ top investors. More important is the pressure fund firms can bring on gun makers, he said.

The outcome of owning gun stocks in a diversified index fund, Hale said, “is a de minimis impact on your portfolio.”

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U.S.-based open-end mutual funds and exchange-traded funds reportedly own nearly a third of the stock in America’s two publicly traded gun companies, even as Main Street investors are avoiding such shares.
funds, stock, gun, companies
381
2019-24-06
Wednesday, 06 November 2019 05:24 PM
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