The House of Representatives passed two new gun control bills last night. While these bills have no guarantee of becoming law, investors should pay attention. Why? These bills are already causing fluctuations in top gun stocks.
The two bills, introduced by House Democrats, passed yesterday with support from a handful of Republicans. One bill expands background checks on online gun purchases, the other gives the government extra time to conduct background checks.
Where Do Gun Stocks Fit In?
Investors in gun stocks might be disgruntled this morning, seeing major gun manufacturers suffering losses. Companies like Smith & Wesson (NASDAQ:SWBI) and Ruger (NYSE:RGR) have both suffered overnight losses that sully a year of otherwise steady gains. Olin Corporation (NYSE:OLN), a manufacturer of ammunition and chemicals, is also dipping on Friday.
In contrast, companies like Sportsman’s Warehouse (NASDAQ:SPWH) are seeing slight gains this morning, continuing their prosperous week.
Why might these gun stocks be diverging? Well, one can attribute the divergence in these stocks to the fact that ammo and sporting goods distributors will be mostly unaffected by the House bills. Ammo production and distribution are not limited in the same way that gun sales will be if these pieces of legislature are passed.
POWW Stock Declines After Offering New Shares
Not all ammunition companies escaped the week unscathed. Ammo (NASDAQ:POWW) stock has seen significant declines recently, and the House bills aren’t the sole factor.
The company recently announced that it would offer 20 million new shares priced at $5 per share. Shares closed yesterday at $6.78, and investors could be inclined to sell with concerns of dilution. The stock has seen a 15% drop this morning.
What should investors do with this news? Gun stocks have been in a bull period over the last year, and the recent bills might just be a speed bump in the way of future gains. Investing in the dip could be a smart decision with this in consideration. However, beware that Democrats control the Senate, and have the voting power to make the two bills law.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article.
