Shoot for Big Profits in These 2 Obama Gun Trades

It's easy to trade on fears of stricter gun laws

   

 Recommendation: Buy SWHC and RGR

The American people have made their choice, and it’s President Obama at the helm for the next four years. And while more than half of the country celebrates the president’s victory, the other half is depressed, confused and befuddled over the electorate’s choice.

Now, for a small-but-growing segment of those who wanted to see a changing of the guard at the White House, there’s a significant fear that the president will train his sights on a curtailment of one of the most sacred rights our country offers: the right to keep and bear arms.

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Although there wasn’t a major push by President Obama during his first term to water down the Second Amendment, many observers (myself included) suspect that the president and his party are hostile to existing firearms laws, and that given the opportunity to increase regulation on gun ownership, the president will move to do just that.

Frighteningly, the administration’s first salvo to curtail gun rights took place less than 24 hours after the president’s reelection. The day after the vote was in, the U.S. Mission to the United Nations helped move the U.N.’s Arms Control Treaty a step closer to enactment. America joined 157 other nations in voting to finalize the treaty in March. None was opposed and there were 18 abstentions.

Now, the implementation of this U.N. treaty isn’t by itself going to restrict any existing freedom of Americans to purchase and own firearms. However, fear of increased limitations on freedom in this realm is very real, and this fear represents an investable thesis for traders.

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Taking advantage of this trend is quite easy, as there are only two publicly traded companies that actually make firearms. Fortunately, both have seen their share price explode over the past year.

The two publicly traded gun makers, Smith & Wesson Holding Co. (NYSE:SWHC) and Sturm, Ruger & Co. (NYSE:RGR), each surged in Wednesday, Nov. 7 trade, a clear reaction to the Obama victory, with SWHC vaulting nearly 10% and RGR leaping almost 7%. Those kinds of gains haven’t been isolated, as SWHC shares are up 135% year to date, while RGR is up almost 49% year to date, through Nov. 12.

Now, despite the spike in the share price of both these gun stocks, the gun-buying binge isn’t near over yet. Both companies have seen record sales and earnings this year, and both expect to have another stellar year in 2013. I think that will keep buyers interested in these growth stocks for some time to come, so if you’re a trader, it’s not too late to get long SWHC and RGR.

I’m looking for 20% gains in Q1–which means, get out of RGR once it hits $60.90, and SWHC once it hits $12.75.

 

If my thesis is correct, then having these two stocks in your portfolio could help your hit the profit bullseye.

 Recommendation: Buy SWHC and RGR

At the time of publication, Jim Woods did not hold a position in any of the stocks mentioned here. He does, however, own many firearms, including a Smith & Wesson 1911.


Article printed from InvestorPlace Media, http://investorplace.com/247trader/shoot-for-big-profits-in-these-2-obama-gun-trades/.

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