Sturm Ruger and Co (RGR)

[Emerging Growth]

Gun shops have been the beneficiaries of a marked rise in sales since the tragedy at Newtown left 27 people dead. The incident reignited the never-ending public debate over gun control legislation in our country. On Wednesday of this week, President Obama put his strategy to tighten gun laws before the American people. The proposal includes a ban on assault-type weapons and much stricter regulations regarding background checks on perspective buyers. Ironically, any move to intensify regulations has had the reverse effect of the president’s proposed laws. It has literally put more guns into the hands of the public as gun sales are in the process of ramping up dramatically at this writing. With well over 300 million weapons now on the street it is debatable if such restrictive laws would ever pass congress but gun owners aren’t taking any chances. As a result, increased sales have helped to send gun manufacturer stocks through the roof, and shares jumped again on Wednesday during Obama’s speech.

Whatever the outcome of the legislation, Sturm Ruger & Company (NYSE: RGR) along with competitor Smith and Wesson Holding Corporation (NASDAQ: SWHC) are riding the wave of gun owner uncertainty. Sturm Ruger rose another four percent yesterday in heavy volume, on the heels of Wednesday’s five percent hike. Previously shares had been unchanged since the school shooting on December 14 2012, but they are up 24 percent from a year ago. Smith & Wesson stock rose 6.5 percent to $8.98. Shares are down 12 percent since the school shooting, but up a respectable 76 percent from a year ago. Shares in Cabela’s (NYSE: CAB), a sporting goods merchandiser which sells guns, have also seen an increase, up this week by 6.3 percent. Although shares in gun makers have been climbing in recent years on higher sales, the horrible incident in Connecticut has provided impetus on both sides; sending many investors rushing to the exits as the likelihood for stricter controls has begun to solidify. Conversely, many more traders are rushing in to buy attempting to cash in on the rally. The investors are betting on gun sales and not on gun controls at this point. Those exiting are betting on stricter gun legislation in the offing.

In the end, while Americans support gun control in theory, it seems that very few Americans want the government to limit personal rights to get a gun. No matter which side you come down on, there is no denying the recent rally in trading of gunsmith shares. Sturm Ruger has a market cap of $988.85 million and is trading at $52.15. Smith & Wesson has a market cap of $589.67 million and is trading at $8.98 per share. Both companies are doing well by the numbers right now and are worth a bit of research in order to see if they are viable options for your portfolio. Yesterday, we put a short story out on SWHC, which was down 1% for the session. It’s a hot-button issue and will continue to be so in the long-term.


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http://emerginggrowth.com/featured_stories/sturm-ruger-company-nyse-rgr-and-smith-and-wesson-holding-corporation-nasdaq-swhc-riding-high-on-second-amendment/01/23/2013