Gun Industry Boosted By Tension In Washington
Gun control has been a polarizing issue in the US for years, but in recent months an outbreak of mass shootings has caused the question of whether or not the nation needs tougher gun laws to make its way into the spotlight once again.
Division in Congress caused President Barack Obama to announce plans to tighten gun laws, even if that means using his executive authority and bypassing the House and Senate.
Bucking The Trend
U.S. stocks tumbled to begin 2106 as uncertainty about the year ahead and turmoil in China weighed on investors' minds. However, gun stocks like Smith & Wesson Holding Corp (NASDAQ: SWHC), Sturm, Ruger & Company (NYSE: RGR) and Vista Outdoor (NYSE: VSTO) were all able to post gains in a down market.
While that may seem counter intuitive with plans to tighten restrictions on the table, gun makers actually saw their sales surge as consumers rushed out to buy guns while they still can.
Rush To Buy
The mass shootings in both Paris and California boosted gun sales significantly and Obama's plans to cut down on gun violence in the US served as more incentive for people to rush out and buy guns now. Louis Navellier of Navellier & Associates commented that "Mr. Obama is the best gun salesman on the planet" and attributed much of gunmakers' surge to his announcement.
A Lasting Trend?
However, on Wednesday Smith & Wesson shares fell 4.45 percent and Sturm Ruger's stock lost 3.54 percent as many began to question whether or not the increased interest in guns would last. Analysts at Wedbush Securities cut their rating for Smith & Wesson from Outperform to Neutral this week, saying that such strong sales are unlikely to continue once the hype peters out.
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