The presidential election is finally over. On Tuesday, the Electoral College re-elected President Barack Obama for another four years. The initial post-election reaction was negative for many companies in the stock market, but a few names managed to dodge the broad market sell-off.
Who’s the best gun salesman in the world? The answer is President Obama, according to Wall Street and various other outlets. Shares of Smith & Wesson Holding Corp. (NASDAQ:SWHC) and Sturm, Ruger & Co. (NYSE:RGR) both appeared to be bullet proof on Wednesday, as the stock market suffered its worst trading day of the year. The general thesis is that since Obama was re-elected, fears of tighter gun control laws will provide a catalyst for more gun sales, before it becomes harder to purchase one. After-all, Obama comes from Chicago, one of the most anti-gun regions in the nation.
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While it is impossible to know why each gun buyer is making a purchase, gun sales have done exceptionally well over the past four years. According to an analysis of the gun industry by The Associated Press, the federal government has conducted roughly the same number of background checks for gun owners and prospective buyers under Obama’s first term, as it did under George W. Bush’s first six years of presidency. For the first time since 1993, the number of federally licensed retail gun dealers in the U.S. increased in 2010 and 2011, adding 1,167 more licensed dealers.
The Benchmark Company, a New-York-based financial research firm, also notes the recent strength in the gun industry. Firearm sales have grown 10 percent annually since 2008, compared to 7 percent rate from 2001 to 2007. Furthermore, firearm purchases jumped 27 percent in 2009, the year after Obama was first elected president.
Mike Greene, an analyst with the firm, explains, “While we maintain our view that these political sales do not represent the entirety of recent firearms sales growth, we expect that with President Obama’s re-election these sales could continue well into his second term,” according to Bloomberg.
In March, Sturm, Ruger & Co. announced that it had to suspend the acceptance of new orders for the first time in company history, due to heavy demand. In the first quarter of 2012, the company received orders for more than one million units. In late May, it resumed the normal acceptance of orders, explaining that “Demand for our products is very strong, and the current backlog remains significantly above year ago levels. Our production and shipments in the first quarter of 2012 increased more than 50 percent from the first quarter of 2011 and remain very strong.”
By the end of Wednesday, shares of Smith & Wesson Holding Corp. and Sturm, Ruger & Co. surged 9.6 percent and 6.8 percent, respectively. Companies with exposure to higher gun and ammo demand also outperformed the market. Cabela’s (NYSE:CAB), one of the most well-known outdoor recreation brands in the world, increased nearly 2 percent. Although Dick’s Sporting Goods (NYSE:DKS) traded 1 percent lower, it was better than the S&P 500’s 2.4 percent decline.
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