Stocks in guns up after shooting
Shares in companies that make guns and ammunition were up following the massacre Sunday night in Las Vegas, an unfortunately common knee-jerk reaction following mass shootings. Investors often believe that people will stock up on guns following shootings out of fear the federal government will restrict gun ownership, even though it has not in the past.
Shares in American Outdoor Brands Corp. (previously named Smith & Wesson) gained 3.2 percent and shares in Sturm, Ruger & Co. shares closed up 3.5 percent. Both were up more than 6 percent at the opening following news that a sniper on the 32nd floor of the Mandalay Bay Resort and Casino killed at least 58 people and injured more than 500.
The latest shooting came at a time when Congress is considering bills that would ease restrictions on firearms and accessories. The Chronicle reported just before the shootings that as early as this week, the House could pass a bill that would roll back decadesold restrictions on gun silencers. Critics say these noise suppressors could make it
harder to find the shooter in a mass attack. In addition, the House is considering legislation that would let people carry legally concealed weapons into states, such as California, that tightly restrict weapons concealment.
Both U.S. gunmakers have been struggling with weak sales, despite aggressive promotions, in recent months. American Outdoor shares are down about 35 percent since mid-June, and Sturm Ruger’s are off 20 percent. The Standard & Poor’s 500 index is up about 4 percent during the same period.
Both companies experienced strong sales last year. Retailers and investors were expecting that consumers would buy guns before the presidential election in anticipation that a win by Hillary Clinton could usher in stricter gun controls. Both stocks plummeted after the surprise win by President Trump, who was endorsed by the National Rifle Association. At a meeting of the NRA in April, Trump promised he will “never infringe on the right of the people to bear arms.”
In a conference call with analysts in August, American Outdoor CEO James Debney commented on the company’s weak results for its first fiscal quarter that ended July 31. “Firearms revenue for the quarter also faced a challenging comparison to last year’s hiking level of firearms demand, which we believe was driven by concerns for personal safety and the potential for increased firearm legislation.”
The number of units shipped into the consumer channel in the quarter that just ended was 39.1 percent lower than the same period last year, he said.
Also in the latest quarter, the company agreed to acquire the assets of Gemtech, “a provider of quality suppressors for the consumer and professional markets,” Debney said. “We view this acquisition (as) somewhat opportunistic, allowing us to enter the suppressor category plus potential favorable changes in legislation and at the time when the market is particularly soft.”
After previous shootings, a number of states agreed to sell shares in gun and ammunition makers held in state coffers or state-employee pension funds.
After Adam Lanza killed 20 children and six adults at Sandy Hook Elementary School in Connecticut in December 2012, the California Public Employees’ Retirement System and the California State Teachers’ Retirement System agreed not to own stock in companies that make firearms that are illegal to sell in California. They both sold stock in Smith & Wesson and Sturm, Ruger but retained their stock in Vista Outdoor, owner of Savage Arms, because its guns are legal for sale in California.
In September 2016, the San Francisco Employees’ Retirement System owned stock in three companies that make guns or ammo: Orbital ATK, Vista Outdoor and Smith & Wesson. Through an index fund, it owned stock in three retailers that sell guns or ammo: Dick’s Sporting Goods, Cabela’s and Big Five Sporting Goods. At that time, the board of the retirement system voted to direct its staff to come up with a plan and timeline to either engage with or divest from those holdings. The system’s staff did not say Monday whether it has come up with a plan.
After Sandy Hook, the New York City teachers’ pension fund and the New York City Employees’ Retirement System each voted to divest from five firearms companies they owned at the time. The New York State Teachers’ Retirement System, however, continues to own stock in American Outdoor and Sturm, Ruger, according to public records.
Vanguard and Blackrock are the two largest shareholders of American Outdoor and Sturm, Ruger. Both are giant money managers that own the stocks in a variety of funds that track indexes. If a stock is in a particular index, the funds are required to own it unless it is in a social fund such as the Vanguard FTSE Social fund, which specifically excludes investments in firearms, tobacco, alcohol, gambling and certain other sectors, a Vanguard spokeswoman said.
Park West Asset Management, an investment management firm in Larkspur, recently acquired 2.1 million shares of American Outdoor, making it the company’s fourth-largest shareholder with a 3.9 percent stake. The firm did not return calls seeking comment.
Investors often believe that people will stock up on guns following shootings.