Why You Should Avoid (Investing In) Guns

  • Although the current world seems crime and war-infested, investors are better off betting against guns and private security.
  • Motif Investing constantly looks for “trends, ideas and world events that could create an investment opportunity,” and then picks 10 to 30 related stocks to build portfolios around, weighing them based on their exposure to the coinciding idea, event or trend.
  • Motif has developed a portfolio of U.S.-listed stocks and ADRs of companies that manufacture guns and ammunition, offer private security services and develop security-scanning equipment.
  • Staying Safe In A Scary World?

    The people behind the creation of the Guns, Guards and Gates motif explained what they were thinking when they constructed the portfolio.

    In a dangerous world where terrorist attacks, mass murders and smaller crimes are common currency, “many American individuals and businesses— not to mention the U.S. government,” are particularly worried about safety. This situation has “left us increasingly vigilant in our hunt for products and security services to keep us safe,” Motif assured.

    Related Link: How To Short The Global Economy Without Becoming A Short-Seller

    “Often, after a highly publicized violent incident, government, business, and individual spending on weapons and security-related products and services tend to soar. Which means that, when it comes to keeping the bad guys at bay, price may be no object.”

    Performance And Allocation

    While the people who thought of this motif believed the stocks selected would fare well in such a “dangerous world,” this was not the case. Over the past year, the portfolio lost 9.3 percent of its value, widely underperforming the S&P 500; in the past month alone, it fell 2.7 percent.

    Source: Motif Investing

    In terms of asset allocation, 51.4 percent of the portfolio’s assets are placed in private security stocks, 27.4 percent in screening equipment companies and 21.2 percent in guns and ammunition makers and distributors.

    Below is a more detailed look at the top stocks in the portfolio. Check out the full motif (and the returns of each stock and segment) here.

    A Closer Look At The Portfolio

    • Tyco International PLC TYC: 23.1 percent
    • ADT Corp ADT: 15.8 percent
    • Stanley Black & Decker, Inc. SWK: 10.6 percent
    • Allegion PLC ALLE: 8.8. percent
    • FLIR Systems, Inc. FLIR: 8.1 percent
    • OSI Systems, Inc. OSIS: 5.2 percent
    • Cabelas Inc CAB: 5.2 percent
    • Sturm, Ruger & Company RGR: 4.3 percent
    • TASER International, Inc. TASR: 3.3 percent
    • Smith & Wesson Holding Corp SWHC: 2.9 percent
    • National Presto Industries Inc. NPK: 2.1 percent

     

    Disclosure: Javier Hasse holds no stakes in any of the securities mentioned above.

    Image Credit: Public Domain

    Posted In: Motif InvestingAnalyst ColorLong IdeasTrading Ideas