By arguably most measures, President Donald Trump is done for. Whether you look at the polls or Trump’s meltdown during the debate or his novel coronavirus infection, it’s getting ugly for Republicans. Given that Joe Biden has a much stronger lead than former Secretary of State Hillary Clinton did back in 2016, it seems the former vice president has this in the bag. And that would be great for gun stocks.
However, no one should be too comfortable with the prospect of a Biden victory before it happens. First, according to Inan Dogan, Republicans apparently have a penchant for sandbagging opinion polls. Then, on election day, they vote for their guy and it could happen again. Second, The Economist noted in November 2019 that poorly educated voters hold the keys to the White House. If so, that might complicate the narrative for gun stocks.
Nevertheless, there are great arguments to support the case for Joe Biden taking the 2020 election. According to NPR, the Trump’s base is shrinking as white Americans without a college degree “have declined as a share of the voting-eligible population across the U.S. and in states critical to the presidential election.”
In addition, based on a Gallup poll, Americans consistently view the novel coronavirus as the nation’s top issue. Though the economy is a critical issue, the public seems to realize that without the pandemic under control, an economic recovery will probably not happen. From that perspective, Trump’s cavalier attitude toward the crisis may come back to haunt him.
If so, the firearms industry will have a bonanza during a Biden administration. His running mate, Sen. Kamala Harris, is a staunch supporter of gun control. And she would love nothing more than to help enact sweeping and debilitating legislation to curb the Second Amendment. Say no more. That will surely spike the following gun stocks.
- Smith & Wesson Brands (NASDAQ:SWBI)
- Sturm Ruger (NYSE:RGR)
- Vista Outdoor (NYSE:VSTO)
- Sportsman’s Warehouse (NASDAQ:SPWH)
- Olin Corporation (NYSE:OLN)
- Walmart (NYSE:WMT)
- Amazon (NASDAQ:AMZN)
- CoreCivic (NYSE:CXW)
- Big 5 Sporting Goods (NASDAQ:BGFV)
Gun Stocks: Smith & Wesson Brands (SWBI)
Easily the most iconic name among gun stocks to buy, Smith & Wesson Brands carries a notoriety that extends well beyond the company’s core user base. According to its website, this was the company that invented the .44 magnum, the big bore revolver made famous by Clint Eastwood. Since then, Smith & Wesson has been instrumental in forwarding incredible firearm innovations.
However, the Trump administration has not been favorable to SWBI stock. A few days before the 2016 election, shares were trading hands above $20. After the surprising result, Smith & Wesson’s equity was priced in the teens and heading lower. Though some spikes occurred that coincided with mass shooting tragedies, the gun manufacturer was hurting before the pandemic.
With the coronavirus sparking racial and social tensions, though, SWBI stock become one of Wall Street’s hottest commodities. Frankly, this wasn’t surprising because diverse countries like the U.S. tend to lack in social trust. As a counterpoint, researchers Bongoh Kye and Sun-Jae Hwang argue that in South Korea, trust increased in Korean society, people and government institutions.
That’s the exact opposite of what we’re seeing here, which is unfortunate. With so much tension, I believe gun stocks like Smith & Wesson will perform well no matter who wins the election.
Sturm Ruger (RGR)
Though Sturm Ruger doesn’t have the notoriety factor of Smith & Wesson, the name resonates among gun stocks for the underlying company’s track record of manufacturing reliable, quality firearms. Because of that, Ruger-branded guns tend to be pricey. Therefore, you can make an argument about the resilience of the firearms industry by analyzing RGR stock.
During the past few years, Ruger demonstrated a stability that just wasn’t seen among many gun stocks. That said, RGR stock wasn’t immune to political volatility. Just like SWBI, RGR shares tumbled following the 2016 election. Shares briefly recovered, though they experienced some weakness in January and February of the following year.
And similar to SWBI, Ruger took a beating in the second half of 2019. Certainly, the economic impact of the U.S.-China trade war didn’t bode well for discretionary purchases. And I’m sorry, but buying guns during a Republican administration is considered discretionary. Then, the coronavirus struck, and all bets were off.
But if Biden takes the White House, I believe we could see the biggest rise in gun stocks over a one- or two-month period. That’s because running mate Kamala Harris advocates for strict gun control, including banning semi-automatic rifles. Because this is the main reason why people buy firearms in the first place, expect huge upside if Biden wins.
Gun Stocks: Vista Outdoor (VSTO)
Last year, Vista Outdoor garnered some headlines when management announced that it had sold its firearms business for $170 million to Long Range Acquisition. This comprised of Vista’s Savage Arms and Stevens brands. If you don’t know, Savage is very popular with the hunting crowd for its extensive portfolio of excellent bolt-action rifles.
Indeed, if reincarnation is real and I come back as a Montana mountain man, I’m going to buy a Savage Arms 110 Stealth Evolution chambered in 338 Lapua Magnum. It seems like quite the Montana thing to do.
Anyways, Vista’s decision to sell its firearms business seemed even more like a terrible decision for VSTO stock in light of the coronavirus pandemic. But how wrong I was! Fortunately, Vista kept its ammunition business because who knows? Management may have had an inkling that something was up.
In fact, VSTO stock has held up better than other gun stocks during this crisis. While gun inventories ebbed and flowed, what was really in demand — whether you’re a first-time buyer or a someone that could supply a brigade — was ammunition.
Therefore, if Biden wins, you’re going to want Vista’s equity.
Sportsman’s Warehouse (SPWH)
Want to trigger a gun-toting conservative? Just tell him that you’re interested in buying an “assault rifle.” You will spark a unbridled diatribe that semi-automatic rifles, by virtue of them being semi-automatic, cannot possibly be assault rifles. Instead, what law-abiding civilians have access to are “sporting” rifles.
Never mind that many of the guns sold at Sportsman’s Warehouse look like the M4 carbines that our Marines carry. If it’s a retail firearm, you’re buying a sporting rifle because you’re playing sports with them, I guess.
You probably think I’m joking. Go ahead and say the term assault rifle. I double dare you.
At any rate, I mention this as a positive catalyst for SPWH stock. Look, there are more guns in the U.S. than there are people. That means we’re very passionate about gun ownership. And many of us will defend the honor of our guns, going so far as to berate you on proper terminologies.
Of course, this sounds absolutely nuts to passersby. But as a catalyst for gun stocks, this enthusiasm is exactly what you want as an investor. Therefore, should Biden win, I see nothing but clear blue skies for SPWH stock.
Gun Stocks: Olin Corporation (OLN)
As a chemicals manufacturing company, Olin Corporation doesn’t offer a pure play on gun stocks. However, you don’t want to ignore the company as OLN stock nevertheless has an integral role in the firearms industry. Owning the Winchester brand of ammunition, it’s this segment that could see shares rise, especially if Team Biden wins it all in November.
Perhaps not surprisingly, Olin didn’t follow the path of other gun stocks when Trump was elected president. Instead, OLN stock increased in market value to early January 2018 based off Trump’s domestic manufacturing push, which incentivizes its underlying chemicals business. However, the U.S.-China trade war poured some cold water on this narrative.
Now, Olin looks more interesting. Perusing gun store websites, it appears that demand has subsided. For instance, some of the popular AR-15 sporting rifles command only a small premium, if at all. Instead, it’s the ammunition that’s selling like hotcakes. Some sources report a 250% increase in ammo price premiums.
I believe it. Comparing prices to pre-pandemic times for popular calibers like 9mm, the premium is through the roof. And you’ll be lucky to get your hands on them. While terrible for those who want to participate in hunting season, it’s great news for Olin.
When firearms make frontpage news — which is too often in the U.S. — Walmart occasionally finds itself in the controversy. Yes, Walmart is a big-box retailer that’s synonymous with one-stop shopping. But that convenience also entails gun and ammo sales.
Now, Walmart has been making a concerted effort to clean up its image, especially in 2020. Earlier this year, CNN Business reported that “Walmart is removing firearms and ammunition from sales floors in some of its stores following nationwide protests sparked by the death of George Floyd.” However, “…firearms and ammunition are still available for purchase at Walmart” but are “being stored in a secure room.” Technically, that makes WMT stock an indirect play on firearms.
Plus, Walmart is a solid name to add to your firearms-related portfolio due to its broader business. As well, with the holiday season upon us, WMT stock should fly higher irrespective of who wins the White House.
Gun Stocks: Amazon (AMZN)
Given that it’s a global e-commerce powerhouse looking to expand to additional markets and industries, Amazon has done well to avoid unnecessary controversies. Therefore, you’re not going to find guns and ammo being sold at Amazon.com, which would be a legal headache anyway. But that doesn’t mean that AMZN stock has zero relation to firearms. Quite the contrary, savvy gun enthusiasts know to check out Amazon for firearms accessories.
For example, Trijicon sells its optics on Amazon.com, including the world-famous Advanced Combat Optical Gunsight (ACOG). Fans of Activision Blizzard’s (NASDAQ:ATVI) Call of Duty series will recognize the ACOG as they’re blasting away digital enemies. And believe me, these optics are big-time sellers.
Importantly, gun-toting conservatives also have their version of cosplay — it’s called “tacticool.” Typically, this involves dressing up in military camos, visiting an indoor range and over-accessorizing with optics, lasers, flashlights and disco balls.
If you think I’m joking, please go to your local gun range. By the third visit, you’ll have come across one of these eccentric types. But you know what? Tacticool operators have money to burn, which augurs well for AMZN stock.
On the surface, CoreCivic has nothing to do with gun stocks. After all, we’re talking about a private prison. However, in a backhanded way, CXW stock could see a significant rise in demand. Allow me to explain.
Buying a firearm isn’t like any other retail purchase. Furthermore, each state has its own firearms laws, with some states being wackier than others. Arguably, California is the worst. Democrats see their litany of gun control measures as imparting responsibility. But due to the strange nuances of gun laws, otherwise perfectly law-abiding citizens could find themselves afoul of firearms laws.
Logically, this would mean more imprisonment, which would facilitate a greater consumer base for CXW stock. And don’t think that this is a stretch. Consider the case of the McCloskeys, who were indicted by a grand jury recently. Much of the mainstream media has vilified the now infamous gun owners.
Unfortunately, there will be many McCloskeys that don’t have media coverage that are going to jail for firearms-related charges. Cynically, you may see a rise in the otherwise revolting private-prison system.
Gun Stocks: Big 5 Sporting Goods (BGFV)
Easily one of the most speculative plays among gun stocks, Big 5 Sporting Goods has been on a downward trajectory since late November 2016. While some of this could have been due to less urgency to buy firearms, there’s another factor at play. Sporting goods stores have been on the decline, with younger people more interested in esports than real sports.
Back in the doldrums of the pandemic, BGFV stock was trading for below $1. There was genuine fear that the worst was coming for Big 5. Fortunately, if I can even say that word, firearms and ammo demand saved the day. At time of writing, BGFV is trading hands at slightly over $8 a pop.
Will this narrative carry forward into 2021 and beyond? So far, the trend looks very good for BGFV stock. However, this name is more dependent on a Biden victory than other gun stocks in my opinion. That’s because Big 5 specializes in shotguns and bolt-action rifles. Its stores don’t carry centerfire AR-15 rifles. Nor does it carry handguns, only concealable pellet guns.
Thus, if Trump wins, demand could collapse because many gun enthusiasts prefer the “cool” factor. But if Biden wins, people will just buy whatever they can get their hands on before the Democrats do.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.