Gun Stocks: Why Shares of RGR, POWW, OLN, SWBI, VSTO Are on Watch Today

Today, gun stocks are on the move, though not all in sync. Investors in Smith & Wesson Brands (NYSE:SWBI) and SWBI stock have seen shares rise as much as 3.5% on the day, before selling off this afternoon. However, peers Sturm Ruger & Co. (NYSE:RGR) and Vista Outdoor (NYSE:VSTO) were down 2% and 4%, respectively, as of this afternoon.

a photo of some guns and ammunition

Source: Shutterstock

Gun stocks have been on investors’ minds amid news today from top politicians. President Joe Biden called for a ban on assault-style weapons and high-capacity magazines, addressing a number of recent mass shootings. He referenced his previous work in this arena as a template for how he will approach closing loopholes in the background check system and restricting the types of guns that can be purchased.

Biden ran on a campaign to combat gun violence in the U.S. Thus, it’s not surprising that this announcement was made today, given the high-profile mass shootings in recent days.

Gun Stocks Likely to Be in the Spotlight for Some Time

As with any piece of potential legislation in the gun space, investors take notice. Most industry experts believe gun legislation, and the regulatory environment broadly, are the biggest demand driver for gun sales.

The move to tighten gun legislation has traditionally resulted in a spike in firearm sales. However, restricting the types of guns available for sale could have a significant negative impact on gun manufacturers. Thus, it appears investors are still digesting the news and analyzing what the potential impact could be on gun manufacturers.

Indeed, this topic continues to be a politically divisive and hot-button issue. However, investors need to look at the data objectively and analyze what this legislation means for their underlying investment.

In the case of SWBI stock, the company trades at roughly 10 times trailing 12-month earnings, so it’s not overly expensive. Factoring in demand growth/decline from this news is the difficult piece. Accordingly, I expect some higher-than-normal volatility on the horizon for shareholders.

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

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