Guns, Violence, Obama, and the Stocks Behind Them

Another week… another story involving guns and the kind of violence that belongs only in ’80s action movies. 

Unfortunately, these headlines have become all too common for us, but it still doesn’t shock us any less.

The recent sniper shootings in Dallas — targeting police — and last month’s shooting at an Orlando nightclub underscore two facts about gun violence most of us fail to consider.

The first is that the media absolutely loves these headlines. 

gun

It sells papers and drives Internet traffic like nothing else. 

In fact, I bet simply calling a book or movie “Active Shooter” — the buzz-term that often surfaces when discussing these incidents — would make for an immediate blockbuster.

A good number of us have gotten wise to the reality that mass murder, especially when involving a semi-automatic firearm, is like crack for the modern media, but the second fact is far less familiar to the everyday citizen.

These stories drive up share prices of publicly traded gun manufacturers.

Typically on the morning after one of these events, the President publicly addresses the nation and expresses condolences to the victims’ families, while also adamantly conveying his commitment to the fight for stricter gun control laws… stating that stricter gun control laws would be the solution for all of this unnecessary violence.

Immediately after the President’s public demand for stricter gun control laws, the debate of gun control is dredged up yet again. And ultimately the debate comes down to one question: Do we, as Americans, have the right to possess firearms?

Panic selling is something every trader knows as a wild-card factor, but panic buying? 

Well, it all goes back to something at the very heart of American culture and American national identity.

Our Constitutional Right

Adopted in 1791, the Second Amendment of the United States Constitution reads:

A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.

Americans interpret this as their given right to own guns and possess them in the way that they see fit. And when the government starts trying to control this right, that’s when Americans start feeling threatened.

President Obama, America’s Top Gun Salesman

There’s an interesting pattern that happens when the President publicly calls for stricter gun control laws: we start to see a significant increase in gun sales.

In January 2013, during President Obama’s term, there were 2 million guns sold, which has been the highest amount of guns sold in the past 13 years.

This was right after the Sandy Hook Elementary School shooting…

And right after the President’s speech about increasing gun control and how we need to evaluate who’s buying guns and how they’re buying them so an event like Sandy Hook never happens again.

On January 5, 2016, the President made a speech about the Common-Sense Gun Safety Reform.

In his speech, he discussed his plan of action on providing better gun laws. This speech came a month after the San Bernardino, California, mass shooting.

Gun manufacturing companies that sell firearms saw an increase in their stock the same day as the President’s speech. Smith & Wesson (NASDAQ: SWHC) had an increase of 17.65% and Sturm, Ruger & Co. Inc (NYSE: RGR) had an increase of 6.76%.

On the first trading day after the Orlando massacre, the worst of its kind in American history, Smith & Wesson blew up again, gaining close to 8%.

The day after the Dallas sniper attack, Smith & Wesson was up 5% at open. Ruger was up 6%.

The reason isn’t hard to deduce. 

Gun owners fear they’ll have to jump through more hoops just to buy a gun, so they rush and buy now.

Or they go out and buy guns as a means of protection.

Either way, they’re buying guns.

The NRA, a Force Behind Gun Sales

The National Rifle Association (NRA) is another force that’s evoking fear into gun-owning Americans and making them buy more guns. Last year the NRA wrote this on its website:

If you own a gun now, take heed. President Obama and now Hillary Clinton finally made clear what they’re really after—national gun confiscation.

The NRA is making gun owners feel like they won’t have any rights as long as President Obama (or Hillary Clinton, if elected) is in executive power…

That their sole mission while in office will be to take guns away from all Americans, which, of course, is the worst possible outcome for any gun owner.

While both of these forces are on opposite sides of the gun-control debate, they both are the main driving force behind increasing gun sales and gun-related stocks.

And as long as this debate continues to exist, gun sales and gun-related stocks will continue to increase.

An Investing Opportunity Arises

As the gun control debate remains strong and prevalent in our society, it’s a good idea to start taking advantage of the investing opportunities that are present.

We know that when a mass shooting happens or when the President talks about gun control laws, that’s when you’ll see an increase in gun sales and gun-related stocks.

With this information and from an investor’s standpoint, I highly recommend that you start investing in companies like Smith & Wesson and Sturm, Ruger & Co. Inc. — gun manufacturers that also sell firearms.

Smith & Wesson had $210.8 million in net sales for its third quarter of 2016.

This was an increase of 61.5% compared to the previous year’s third quarter.

And Sturm, Ruger & Co. Inc reported $173.1 million in net sales for the first quarter of 2016, an increase of 26% from the first quarter of 2015.

The demand is present, and both of these companies are benefiting from the increased gun sales.

Get Real: Lose the Emotions

Truth be told, we haven’t witnessed our last mass shooting, and we haven’t heard the last speech from the President calling for stricter gun control laws.

And we definitely won’t be witnessing Americans being stripped of their Second Amendment rights anytime soon.

Not to mention that Americans own an estimated 270 millions of guns and continue to buy more guns.

And as long as Americans are buying guns, owning shares in a company that sells and/or manufactures firearms is going to appeal to the emotionless trader.

Make no mistake about it: If you want to profit, emotionless is the way to go.