7 Gun Stocks to Buy for a Profitable Ride on the Blue Wave

Gun stocks - 7 Gun Stocks to Buy for a Profitable Ride on the Blue Wave

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Gun stocks got several boosts in 2020 and the start of 2021 looks no different. Historically, consumers purchase more guns on concerns that they’ll lose gun rights because of Democratic leadership. But how can investors measure that concern? A great proxy for the strength of the gun market — and by extension gun stocks — is Federal Bureau of Investigation (FBI) background checks. 

Between November and December of 2020, there were over 2 million more background checks performed than in the last two months of 2019. That uptick is a more than 37% increase. 

What’s more, one Reuters article clarifies that 2020 has indeed been a busy year for all things gun. More background checks were done in the months through September than through all of 2019. 

Of course, there are many factors driving gun sales and stocks. And 2020 was an exceptional year which saw many new trends, both broadly and within the gun sector. In fact, many first-time gun owners became gun enthusiasts in this unprecedented year.

But the one prevailing factor that always drives gun sales is that worry that Democrats will limit gun rights. So, now that the U.S. is about to be fully engulfed in a blue wave, these seven gun stocks should receive a significant boost.

  • Vista Outdoor (NYSE:VSTO)
  • Ammo Inc. (NASDAQ:POWW)
  • Smith & Wesson Brands (NASDAQ:SWBI)
  • Sturm, Ruger & Company (NYSE:RGR)
  • Sportsman’s Warehouse (NASDAQ:SPWH)
  • Big 5 Sporting Goods (NASDAQ:BGFV)
  • Axon Enterprise (NASDAQ:AAXN)

Gun Stocks to Buy: Vista Outdoor (VSTO)

the Vista Outdoor logo is displayed on a smartphone
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Vista Outdoor is not one of the pure play gun stocks. The company serves the broader outdoors enthusiast, a category that includes guns and shooting sports among other sectors. However, Vista Outdoor does design, develop and manufacture ammunition, primers and other shooting related products. It just also carries a wide variety of other outdoor products — from golf clubs to bicycles.

The company released its last earnings report on Nov. 5, with announced sales growth of 29% and 79% gross profit increases. Within shooting sports, the company also saw great results. Sales increased 26% to $380 million in the quarter. That’s out of $575 million in total sales. So, investors should note that two-thirds of company sales are now attributable to shooting sports.

VSTO stock already has analyst approval and is rated a strong buy. And the markets should bring it upward in price, as gun rights anxieties regarding Joe Biden and the blue wave rise. 

Ammo Inc. (POWW)

a photo of some guns and ammunition
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Ammo Inc. is by far the smallest company on this list with just 126 employees. POWW stock is interesting, though, and worth a potential purchase because it’s a near-penny stock play on gun rights fears in the wake of the blue wave.

As you might have guessed, Ammo focuses on ammunition needs. The company sells ammunition across rifles and pistols and seemingly by every caliber. What’s more, one of its more interesting products is its “Streak” bullets which leave a visual path like a tracer but do not generate heat. 

However, investors are interested in more than the simple technical specifications of the company’s products. Instead, they look to financial strength in determining value. On that, Ammo Inc. has given guidance and anticipates reporting at least $16.5 million in revenue on its upcoming earnings report. CEO Fred Wagenhals stated, “We are poised to report a 489% year-over-year revenue increase for our fiscal 2021 third quarter ending December 31, 2020.”

So, this name has a lot of promise when it comes to gun stocks.

Smith & Wesson Brands (SWBI)

Image of a pistol and several bullets laying on a dark grey surface
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When Smith & Wesson brands reported its latest earnings, investors had a lot to be excited about. The company experienced a 118.7% sales increase year-over-year (YOY) from $113.7 million to $248.7 million. However, the announcement didn’t correlate to a massive spike in SWBI stock prices. In fact, prices were essentially unmoved on the news. 

Beyond that, though, the markets may very well reward Smith & Wesson on gun owners’ general blue wave worries as they relate to gun rights. The company’s strong quarter generated $49.1 million in income and allowed it to get to zero bank debt, a laudable accomplishment that makes it one of the more attractive gun stocks.

Finally, Smith & Wesson is well aware that there is going to be an increase in first-time gun owners this year. To that end, the company launched a campaign to support that initiative — and profit from it.

Sturm, Ruger & Company (RGR)

a pistol on a white surface
Source: Susan Law Cain / Shutterstock.com

Ruger is another well-known name to those who are familiar with guns. Like other gun picks, the company could certainly see a sales boost in the upcoming months and quarters on the change of administration in the White House. But even without that news, RGR stock has already had a strong year. Shares have risen over 42% in the past one year and look to be going up even more.

Like competitor SWBI, Ruger saw a bump in sales this year and in recent quarters. For instance, 2020 Q3 sales amounted to $145.7 million, up from $95 million in the same quarter last year. This is very likely attributable to the same factors driving the industry upward in general as the U.S. changes leadership. 

Moreover, new product sales contributed to 24% of the company’s 2020 sales through the first three quarters. So, if the company can stir up even more interest in its new products with first-time gun owners, RGR stock can rise even higher this year and stand out among the gun stocks. 

Sportsman’s Warehouse (SPWH)

sportsman's warehouse (SPWH) app logo on a mobile phone screen
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Sportsman’s Warehouse is, like Vista Outdoor, not a pure play among the gun stocks. The company caters to hunting, fishing, camping, shooting and the outdoor lifestyle. SPWH saw a 59.1% increase in sales in Q3 of 2020. The company attributes that increase to a “surge in demand across all major categories, led by our hunting and shooting category, as well as strong growth in our ecommerce platform.”

What’s more, the 61.3% increase in sales that the company experienced through the first three quarters of 2020 (compared to 2019) look to have continued into the new year. Back in late August, the National Rifle Association also reported that 40% of all gun sales were attributable to first-time gun owners, a category of consumers that could very well increase with recent trends.

Finally, Sportsman’s Warehouse locations are heavily concentrated in the western Unites States. And in the past three years, nearly 50% of sales have come from its hunting and shooting department (Page 12). So, the company should really get a boost if western state gun sales rise more than other geographies. That said, it should be strong regardless.

Big 5 Sporting Goods (BGFV)

A Big 5 Sporting Goods (BGFV) location in a Las Vegas strip mall.
Source: Jonathan Weiss / Shutterstock.com

This California sporting goods retailer reported its strongest quarter ever, with gross profits hitting $110 million in Q3. The company experienced a 27.9% increase in profitability over the same quarter one year prior, with gross profit amounting to $110 million. Big 5 was also able to double its dividend and retained $56 million in cash. 

In the report, CEO Steven G. Miller explained the company’s success:

“I am pleased to report an exceptional third quarter, which represents the strongest sales and earnings performance in our 65-year history. During this unprecedented time, our product offerings are resonating with consumers who are looking for ways to stay healthy and active. Clearly, customers are recognizing our stores as a convenient and safe environment to fulfill their fitness and outdoor recreational needs.” 

Big 5 Sporting Goods sells ammunition and not guns, making it more of a diversified play on gun-rights worries. So, investors seeking gun stocks should be aware of that fact before purchasing shares, although it remains a solid play nonetheless. 

Axon Enterprise (AAXN)

A police issued Taser X26 stun gun and two cartridges are displayed on a table for inspection.
Source: Shutterstock

Axon Enterprise is the last — and perhaps most unique — name on this list of gun stocks. That’s because this company doesn’t actually manufacture guns or bullets. Instead, it produces tasers that are ubiquitous in law enforcement and security. 

The reason AAXN stock appears on this list, however, is that the current trend in guns should correlate with a rise in stocks related to law enforcement. Plus, with the ongoing conversation about the use of force in American policing right now, it seems likely that cities and states will invest more in non-lethal weapons in the coming years. Finally, Axon also produces cameras and analytics solutions. Those are sure to find increasing utility, too.

Over the past five years, AAXN has experienced a robust compound annual growth rate (CAGR) of 27% in revenues. It’s also seen strong growth in its Axon Cloud. So, the company’s unique positioning may find utility in areas outside of law enforcement as well. All in all, it is a strong bet in these strange times. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

Article printed from InvestorPlace Media, https://investorplace.com/2021/01/7-gun-stocks-to-buy-for-profitable-ride-blue-wave/.

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