Smith & Wesson, Sturm Ruger Rise Post-Orlando Massacre

At least 50 people were killed and 53 more wounded on Jun 12 in the Orlando, FL, nightclub mass shooting, the deadliest in contemporary U.S. history. Omar Mateen, the man behind this horrific incident, was carrying an AR-15 style assault rifle.

Reports are that this rifle has been used in several mass shootings since 2011 and has unsurprisingly raised a debate over U.S. gun laws once again.

Moreover, it’s by now a convention in the equity markets that tragic gun incidents typically boost share prices of gun stocks. The possibility of tighter gun control typically boosts short-term demand for weapons as people buy guns on a spree lest they are forbidden to do so in the near term.

Shares of gun makers Smith & Wesson Holding Corp. (NASDAQ:SWHC) and Sturm Ruger & Co. (NYSE:RGR) climbed yesterday after Orlando shooting. While Smith & Wesson shares surged 6.87%, Sturm, Ruger climbed 8.50%. Ammunition maker Vista Outdoor Inc. (NYSE:VSTO) rose about 0.19%. Though outdoor sporting goods retailers Sportsman's Warehouse Holdings, Inc. (NASDAQ:SPWH) and Cabela’s Inc. (NYSE:CAB) have major exposure to firearm sales, their shares were seen to fall 2.55% and 1.59%, respectively.

The Brewing Debate

This Orlando mass shooting has evoked new political debates with Democrats clamoring for gun control measures and Republicans calling out against "radical Islamic terrorism."

However, measures like new gun laws has never been put forward in the U.S. Congress. Any attempt to push for a ban will eventually face fierce opposition, with a strong Republican hold in both chambers of Congress, as they’ve fiercely opposed gun control regulations. Republican politicians and the National Rifle Association have opposed Obama's proposals. They argued that the action plan infringes upon citizens' Second Amendment rights.

Despite strong backing from President Obama, the final attempt at new gun legislation failed in the U.S. Senate in 2013. Americans are believed to be less excited for banning assault weapons.

Are Shootouts Boosting Sales?

Share prices as well as sales of gun makers escalated in January after President Obama vowed for regulations to tighten gun control. The Obama gun plan was intended to intensify screening of prospective gun owners.

However, as per a report from Reuters, gun shop owners and managers are yet to witness a spike in gun sales or ammunition following Sunday's shooting unlike what was seen in the aftermath of the Sandy Hook Elementary School shooting in Newtown, CT in 2012. People may have started believing that the government is not likely to take any measure to control guns.

Meanwhile, the FBI’s National Instant Criminal Background Check System, or, NICS reported an almost 13% drop in firearm background checks in May compared to the prior month. Overall, the FBI reported 1.87 million background checks in May, down 12.9% from 2.15 million in April. The reported number was also way below the first-quarter monthly numbers that were in the 2.5 million to 2.6 million range.

To Sum Up

Gun control has been an important political issue following mass shootings that have gained such enormity in America. President Obama’s stand on stricter firearm regulation helped boost gun and ammunition sales in the recent past.

But the crucial question is whether this gun sales surge will last on fear of tightening regulations? We will also have to keep a close view on the pace of gun sales in the coming quarters to see whether the upcoming presidential election will put the brakes on gun ownership.

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