BUSINESS IS BOOMING
Despite recent tragedies in Orlando and Paris, gunmaker share prices continue to climb,
The Smith & Wesson “Muddy Girl” assault rifle is a featherlight, 2.3 kilograms of camouflaged polymer, though the camouflage effect is not what one might expect. Gone are the conventional dun colours of olive drab and forest floor brown, replaced with a neon pink and black combination more in keeping with a nail bar or cosmetics counter.
What we can take from this is that the Springfield, Mass., gun maker, which releases its 2016 financial results Thursday, is attuned to what it calls the “consumer markets.” Suggested retail price: $499 (U.S.).
By midday Monday, the first trading day after the slaughter in Orlando, Smith & Wesson shares were up $1.50, noted throughout the Twitterverse with such comments as “If you play the stock market, I recommend Smith & Wesson and Sturm, Ruger.” Shares in the Connecticut-based Sturm, Ruger, makers of “America’s favourite .22,” were up a near 10 per cent through afternoon trading.
This was not in any way ironic, as one tweet suggested, for shares in arms makers tend to pop after mass shootings, perhaps buoyed by the expectation that more parents will be ordering up Smith & Wesson’s Bodyguard 380, a pocket-sized pistol at a length of just 13 centimetres. Perfect for graduations and 21st-birthday celebrations.
Meanwhile, the 200-year-old Remington brand reported net income of $22.2 million (U.S.) for the three months ended March 27. Current market conditions are favourable, the company reported. “We experienced a strong, but disciplined demand in late 2015 and the first quarter of 2016 after the tragic events in Paris and San Bernardino, Calif. In response to the demand for opening price point products, we launched the QRC rifle, an entry level price point Bushmaster MSR.”
Note the bland retail language: opening price points, meaning getting cheaper assault rifles to market to meet demand. The QRC can be yours for about $600.
MSR, by the way, stands for “modern sporting rifle.” QRC stands for “quickrelease carbine.” The sell line for the Bushmaster series runs like this: “Name the scenario, the answer is hell yes.”
Each of these companies represents the intersection of firearms and Wall Street — and, further, mom-and-pop investors, a point that is not made often enough. Take a look at the major shareholders at Smith & Wesson. The Vanguard Group of funds takes the top five spots, from its small-cap fund to strategic equity to total stock market. (Hillary Clinton watchers should note that her Vanguard holding, as itemized in her financial disclosure report, is the 500 Index Fund, which is not listed as a Smith & Wesson investor.)
Vanguard and i-Shares are prominent shareholders in Sturm, Ruger.
As for Remington/Bushmaster, the parent company was the Freedom Group, which drew a spotlight after the Sandy Hook Elementary School slaughter in December 2012. Adam Lanza took the lives of 20 children and six educators using a Bushmaster XM-15 assault rifle before taking his own life with a handgun.
Six years earlier, Cerberus Capital Management, the giant U.S. private equity firm, invested in Freedom Group Inc. Indirect investors included the California State Teachers’ Retirement System, the second-largest retirement fund in the U.S., with a membership of more than 800,000 educators. Now there’s an irony: teachers being slaughtered by a weapon made by a company in which a teachers’ pension fund was invested.
In the wake of Sandy Hook, Cerberus issued a press release stating that while its role was to make investments on behalf of clients such as Cal-STRS and not stake a position on the gun control policy debate, it nevertheless had retained an adviser to sell its investment in Freedom Group.
That proved unsuccessful and only last year did Cerberus announce that it had peeled Remington Outdoor from its funds, a move that allowed Cal-STRS to exit.
California’s state treasurer, for one, had publicly expressed frustration that Cal-STRS was taking so long to dump its firearms investment.
The pension fund had been quickly able to sell its shares in both Smith & Wesson and Sturm, Ruger in the spring of 2013. When at last Cerberus provided an out, the pension fund said this: “Cal-STRS has taken a very clear, vocal stand on the issue of firearm divestment among the nation’s pension funds and remains very committed to our decision.”
There’s more to say, but the business of Remington is dense enough. The point is this: The public was becoming increasingly attuned to the street commercialization of the euphemistically named modern sporting rifle.
Omar Mateen’s assault rifle of choice was a SIG Sauer MCX. The Swiss arms manufacturer “set its sights” on the U.S. in the 1980s, establishing manufacturing facilities in Virginia and later New Hampshire. Little surprise the company’s focus has been increasingly U.S.based ever since. jenwells@thestar.ca