With the San Bernardino shooting still fresh in the minds of many American's, not to mention a large number of other mass shootings over just the past few years, politicians running for both state, local and Federal offices this election season have been clear which side of the gun control debate they stand on.
Regardless of whether you believe there should be tougher laws placed on firearms and ammunition in this country, one fact remains, there is no such thing as bad press for the gun business. In the four days following the San Bernardino shooting, gun sales in the state of California jumped from 12,649, during November 29 to December 2, up to 20,664. Furthermore, during the first 11 months of 2015, more than 1.51 million federal background checks for gun purchases had been performed in the state, a figure above the full 2014 count of 1.47 million.
But it's just not mass shootings are good for gun sales. Recent surveys show that American's are buying guns not just to protect themselves from others whom have weapons, but to ensure they can get the guns, accessories, and ammunition they want before politician's change current laws. And that idea of getting ahead of possible regulation is likely to get stronger the closer we get to November 8, 2016, the general Presidential Election date.
When President Barack Obama was elected for the first time in 2008, gun sales jumped nearly 50%, compared to the same time the previous year, during the first week after the elections. If another Democrat is elected into the White House come November, or the Democrat's take back Congress, we could likely see another big jump in gun sales at the tail end of this year. But regardless of whomever wins the White House or controls Congress, the fact remains, we have nine months until the general elections, countless more debates, TV or radio ads, speeches, rallies; during which time we will likely continue to hear the debate go back and forth about what should be done about gun laws. While the arguing back and forth may not worry some current or potential gun owners, it's certainly going to scare a few into buying more weapons, ammunition and accessories.
And that's where the investing opportunity comes in. Don't sit back and wait until September or October to buy the gun stocks, buy them today, ahead of the pack.
The obvious go to gun stocks are going to be Sturm, Ruger & Co. Inc. (NYSE:RGR) and Smith & Wesson Holding Corporation (NASDAQ:SWHC). Although these are the only two pure-play US gun companies investors can buy, but that's not a bad thing. Over the past 12 months RGR is up more than 47% while SWHC is up nearly 80% and with the political catalyst over the next nine months, there is no reason both couldn't continue their performance considering they are trading at 17 times and 14 times future earnings respectively.
Some stocks that would still give investors a taste of the gun industry, but not completely tied to it would be companies like Cabela's Incorporation (NYSE:CAB) or Dicks Sporting Goods Inc. (NYSE:DKS). Both companies sell a large amount of firearms and see increases in sales figures when gun sales nationwide increase. But, since these sporting goods retailers sell items other than just weapons, they offer a little more safety and upside if gun sales don't rapidly increase in the coming months.
The other way to play the gun industry would be through an Exchange Traded Fund. But, while there are three quality Aerospace and Defense ETF's; iShares U.S. Aerospace and Defense ETF (PACF:ITA), PowerShares Aerospace & Defense ETF (PACF:PPA), and SPDR Aerospace & Defense ETF (PACF:XAR), currently only the ITA owns shares of both Smith & Wesson and Sturm, Ruger Co. Now while the ETF may not give you as direct exposure to increasing gun sales, it will also lessen your general investing risk, which is never a bad thing.
At the end of the day, some investors may not be comfortable owning a gun themselves or even buying certain types of sin stocks. And while there is nothing wrong with that, investors who don't mind investing in less than glamourous business's may be able to make some easy money by simple thinking about where the market will likely be heading in the future and front running those moves today. History repeats itself time and time again, and while we certainly don't want to see another mass shooting in the U.S. or abroad, just the simple act of politicians debating over guns laws and American's becoming fearful their rights could be dampened, will likely be enough to increase gun sales in the coming months, if not longer.
Disclosure: This contributor held long positions in Apple, Tesla, Intel, Google, Amazon.com, Facebook, Priceline and Microsoft at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.