President Barack Obama just finished his press conference where he gave an impassioned, heartfelt speech about the need for tighter control guns. At the same time he outlined proposals that could constitute the biggest effort to tighten US gun laws in decades.
As the president was speaking the shares of two leading gunmakers jumped, with Smith & Wesson‘s (SWHC) stock now up more than 3% and shares of Sturm Ruger (RGR) up about 4%.
(Click on the image for larger version; chart from FactSet)
At first glance these two paragraphs seems to contradict each other — surely tighter rules will be bad for gunmakers?
If they pass Congress (which is open to question) the rules could well be bad for business, but it seems the market has decided that they won’t be as bad as previously feared — or maybe there’s just certainty now for investors that didn’t exist; the worst case scenario regarding regulations is clear.
That said, it’s still surprising to see�Sturm Ruger’s stock nearly 5% higher than it was at the close on Dec. 13, the day before the shootings at Sandy Hook Elementary. Smith & Wesson’s shares, even with today’s gains, are still down 9% since that day.
One reason for the difference is that Sturm Ruger has “lower exposure to what may be classified as assault rifles,” said Rommel Dionisio, analyst at Wedbush Securities who covers the industry.� Obama’s plan calls for a ban on sales of assault weapons and high-capacity magazines — Smith & Wesson’s best-selling handgun is the M&P series, said Dionisio, and many M&P guns exceed the 10-round limit that Obama wants.
And remember that gun sales have been through the roof recently — as I reported earlier this month, using background checks as a proxy for sales December saw a 59% year-on-year sales jump, and that was on the heels of November’s 39% increase. Though he’s not at the event, Dionisio said he’d heard that sentiment among retailers and gunmakers at the National Shooting Sports Foundation’s SHOT Show taking place in Las Vegas right now is very strong for the near term.
Update: Here’s a video of the full speech and the list of Obama’s 23 executive actions.
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