Why Fear is Temporarily Driving Sturm Ruger Stock to Higher Highs

It’s not just toilet paper and hand sanitizer under heavy demand, as coronavirus from China concerns are driving Ruger stock higher.

Why Fear is Temporarily Driving Sturm Ruger Stock to Higher Highs

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Fears of civil unrest in the U.S. has also led to big demand for guns, creating a monster opportunity for stocks like Sturm Ruger (NYSE:RGR). Other gun stocks like American Outdoor Brands (NASDAQ:AOBC) and Vista Outdoor (NYSE:VSTO) have rocketed higher, as well.

In fact, thanks to the coronavirus, gun shops can’t keep up with demand. And in some cases, there’s so much demand that shops are seeing short supplies, long lines and purchase limits.

Moreover, the FBI recently saw a sizable 300% jump in background checks in a single day.

“The world has never seen anything like this and people want to make sure they’re prepared for whatever lies ahead, whether that be food shortages, government shutdown, or worse,” a spokesperson for Ammo.com told CNN. “When everything around you is uncertain, having a supply of ammunition can make our customers feel safer.”

So while this may seem like a good time to buy Ruger stock, I wouldn’t touch it — especially with a good amount of fear already priced in. Fear may drive the stock higher immediate term. But as the fear subsides, so will the gains in gun stocks.

The Fear is Priced into Gun Stocks

Coronavirus has incited shear panic around the world.

People are hoarding toilet paper and hand sanitizer over fears we’ll have to hunker down. Granted, we have no immunity to it, we don’t know how it behaves and have little history to go on. And as fear explodes, herd mentality is taking over. Rational thought begins to go out the window. People are being heavily influenced by others, and allowing it to dictate behavior.

So, that’s why there’s no toilet paper on the shelves. And it’s also why guns are flying off shelves.

“It’s really just a matter of, if things go bad in the next couple weeks to couple of months and people are panicking and rioting and looting, the government and the police will not have the ability to protect us,” one California man told NPR. “And that’s really the main issue, it’s not really out of fear it’s just out of being prepared.”

However, the panic won’t last and neither will higher highs in gun stocks, toilet paper stocks, or even hand sanitizer stocks. If you allow yourself to get caught up in herd mentality when it comes to stocks, you stand a high chance of losing money.

Overall, the recent gains in gun stocks will be short-lived. So I would avoid possible options, such as Ruger stock.

Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2020/03/why-fear-temporarily-driving-ruger-stock-higher-highs/.

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