Gun Stocks Deliver High-Performance for Investors

When it comes to investing, one of the most politically enhanced industries has been the gun industry. With 2012 being an election year, focus is once again being placed on gun and ammo stocks. Earlier this year, produced a graphic focusing on gun statistics since President Obama took office. The graphic included statistics such as “January 2012: 20th straight month of firearm background check increases” and “129,166 background checks on Black Friday, most ever for a single day and a 32 percent increase over previous one-day record.” While Republicans and Democrats will always bicker over countless issues, there is no denying the popularity of gun stocks in recent years.

Over the past three years, shares of Sturm Ruger and Co. Inc. (NYSE:RGR), the fourth largest firearms manufacturer in the United States, have surged 360 percent. In March, the Connecticut based company announced it was suspending new orders due to heavy demand. In a company press release, Ruger explained, “Year-to-date, the independent wholesale distributors placed orders with the Company for more than one million Ruger firearms. Despite the Company’s continuing successful efforts to increase production rates, the incoming order rate exceeds our capacity to rapidly fulfill these orders. Consequently, the Company has temporarily suspended the acceptance of new orders.” Ruger expects to continue taking new orders by the end of May 2012. The announcement sent shares immediately higher and have gained almost 50 percent this year. Meanwhile, Smith & Wesson Holding Corp. (NASDAQ:SWHC), which has underperformed in past years, has surged 80 percent year-to-date.

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Companies with exposure to higher gun and ammo demand have also performed well. Over the past three years, shares of Cabela’s Inc. (NYSE:CAB) and Dick’s Sporting Goods Inc. (NYSE:DKS) have increased 226 percent and 154 percent, respectively. Earlier this year, Cabela’s, one of the most well-known outdoor recreation brands in the world, announced plans to open new next-generation stores in Ohio, Michigan and Kentucky. In a press release, the Company explained, “Cabela’s next-generation layout is designed to maximize product assortment and availability while surrounding customers in the outdoor experience with wildlife and outdoor memorabilia displays. The Columbus, Grandville and Louisville stores will feature a Gun Library, Bargain Cave and Fudge Shop, among other features unique to each location.” However, not all gun and ammo related stocks have benefited from strong demand.

Despite a massive ammo order from the Department of Homeland Security, shares of Alliant Techsystems Inc. (NYSE:ATK) are still down 12 percent this year. ATK recently announced it was awarded a five-year contract for a maximum of 450 million rounds of .40 caliber ammunition from the DHS and U.S. Immigration and Customs Enforcement. “We are proud to extend our track record as the prime supplier of .40 caliber duty ammunition for DHS, ICE,” said Ron Johnson, President of ATK’s Security and Sporting group, in a press release. ATK is an aerospace, defense, and commercial products company with operations in 22 states, Puerto Rico, and internationally.

Even though political rhetoric continues to fuel discussions and even fears about firearms, gun ownership is deeply embedded in many Americans. According to a recent Gallup poll, almost 50 percent of Americans claim to have a gun in their home or elsewhere on their property. It was the highest recorded level of gun ownership by Gallup since 1993.

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