Gun Stocks Like NASDAQ:SWHC Near Record Highs
There was a sense in Obama’s speech suggesting that the time for stricter controls may finally arrive and that those proposing to enforce stricter gun controls would finally manage to defeat organizations such as the NRA. Nevertheless, as reflected by the stock prices of the two most important publicly traded U.S.-based gun manufacturers, Smith & Wesson Holding Corporation (NASDAQ:SWHC) and Sturm, Ruger & Co. Inc. (NYSE:RGR), neither gun owners nor gun makers should be worried.
In the wake of Obama’s heartfelt plea for tighter gun controls, Smith & Wesson was trading unchanged at $16.63, which is actually closer to its 52-week high of $18.97 than its 52-week low of $9.48. The market view from Sturm, Ruger & Co. is similar; on October 2nd, it was trading at $56.47, down 1.72% from the previous close. As in S&W’s case, it was closer to its 52-week high of $66.00 than its year low of $34.11.
Chart courtesy of www.StockCharts.com
This was the 15th time, since first becoming president, that Obama had to address such a tragedy. In the wake of the latest U.S. shooting tragedy, this one involving the murder of 13 people in Roseburg, Colorado by a lone gunman, one Chris Harper Mercer, the president addressed the nation. In his heartfelt appeal, Barack Obama asked Americans to help “find the right way to change things and to save the lives of our children, and allow them to grow.”
The president also appealed to gun owners, asking them if they feel their interests are being adequately reflected by organizations purporting to address these. Naturally, the president was pointing to the National Rifle Association (NRA), said to be the most powerful political lobby in Washington. The NRA proved its enduring influence when it successfully prevented the introduction of a mandatory background check for those wanting to buy military weapons, such as assault rifles.
Democrat Rhetoric Won’t Hit Smith & Wesson Stock
The markets have spoken and the message they are saying is that gun laws are not about to change anytime soon. Congress will do nothing to increase controls on the sale of firearms. The president has tried, but he knows that gun controls are a losing battle.
Certainly, the repercussions of the tragic shooting in Roseburg, CO will reverberate throughout Washington DC and in the state of Oregon itself. There will be points when the arguments for change may even appear to be setting the stage for a historic change. But the effect will last just a few weeks. Congress is simply determined to enforce the U.S. Constitution, refusing to lift a finger to make it more difficult to own a firearm.
The gun lobby simply does its job too well. It keeps relationships with dozens of senators and deputies. Such relationships are not only legal, they are known and transparent. The NRA’s activity is well recorded and reported. The firearms industry represents one of the safest industries for American investors to consider for long-term gains.
The Democrats would be largely in favor of a reform that provides psychiatric and legal checks before a prospective gun owner is allowed to put his “cold” hands (to quote long-time NRA member Charlton Heston) on a gun, in store or online, where many sales are made. Among Republicans, only Ben Carson, a former neurosurgeon, well located in the primaries, is calling for more restrictions on the sale of firearms.
This Could Send Smith & Wesson Stock Soaring
Yet, the president knows he has lost the battle against gun manufacturers. Despite the pressure, imports are at record levels and the NRA is stronger than ever. Indeed, the more intense the pressure to enforce gun ownership restrictions, the more people rush to buy them. Some say that Barack Obama deserves the prize for best weapons seller of the decade, said Erich Pratt, representative for the Gun Owners of America. (Source: Gun production has doubled under Obama, The Hill, July 23, 2015.)
“President Obama has been relentless in his attacks on the Second Amendment, and it’s not shocking people are frightened and want to protect themselves,” said Jennifer Baker, representative for the NRA.
The data is incontrovertible: under President Obama, the production of firearms in the United States has increased from less than 4.5 million units to over 10.8 million units, an increase of 140%. Imports have also increased. In fact; in 2013, at 5.5 million units, they hit a 30-year record.
In terms of legislation, the news is encouraging for gun rights supporters. Most laws relating to gun ownership that have passed have actually softened the regulations rather than tightening them as reported by The New York Times in December 2013.
The NRA can count on support from Midway USA, an online purveyor of weapons and ammunition of all types and the sponsor of the lobby’s annual meeting and a major influence behind the “NRA Roundup Programme” to promote gun makers. (Source: What is the NRA “Round-Up”?, Midway.com, last accessed October 5, 2015.) Smith & Wesson, Sturm, Ruger & Co., Blaser USA, Glock, Noser, Barret, Remington, and Browning and Beretta Co. USA also back the NRA. The case of Beretta is instructive.
If a legislator proposes to enforce stricter gun laws, the manufacturer simply threatens to move the factory and all its jobs—and votes—with it to another state where laws are more amenable. To reduce this to a Democrat vs. Republican contest would also be a mistake. The NRA subsidizes even the Democrats. Former Democratic Senate leader Harry Reid was one of the most determined supporters of gun ownership rights in Washington.
The NRA also influences the laws of individual states and invests money in the local government elections, naturally supporting pro-gun candidates. The president will not be heard this time. No restrictive law will be approved. The gun lobby is always more powerful than the American citizen and firearm companies can sleep safer than a gun-owning citizen can at night. Even as a supporter of gun ownership controls, I will concede that gun stocks are a good place to park your money.