Posted in: Market NewsOp-ed
Published:
January 21, 2020 5:54 PM UTC

Gun Stocks Need Trump to Lose – or Hope More States Copy Virginia’s Example

Donald Trump may be the Second Amendment's 'biggest supporter," but this hasn't benefitted gun stocks. If he wins again, it could get worse.

  • The stock market has surged under Donald Trump, but gun stocks have fallen.
  • It could get worse before it gets better for firearms manufacturers if Trump gets a second term.
  • More states turning blue and enacting gun-control measures could offer respite for gun stocks.

On the back of a strong economy and Democratic infighting, President Donald Trump’s reelection chances don’t look like a pipe dream anymore. But while Second Amendment advocates have enjoyed his presidency, gun stock investors have suffered.

The “Trump bump” has lifted the Dow Jones Industrial Average and S&P 500 more than 50% since the 2016 election, but firearms manufacturer valuations have tumbled.

Trump is not uniquely problematic for gun stocks, though. Republicans have almost always been catastrophic for the gun industry, while Democrats have had the opposite effect.

Trump Has Been Great for Gun Lovers – But Not for Gun Stocks

Trump has been great for firearms enthusiasts – but not for gun stock investors. | Source: REUTERS/Bryan Woolston

During the Obama years, firearms sales rose dramatically because consumers feared new gun control regulations.

According to the FBI, federal background checks for firearms purchases doubled under President Barack Obama, from 12.7 million in 2008 (George W. Bush’s last full year in office) to 27.5 million in 2016 (PDF).

National Shooting Sports Foundation SVP Lawrence Keane even joked:

Some people jokingly refer to [Obama] as the salesman of the year for the [gun] industry.

Background checks fell more than 8% from 2016 to 2017 as power shifted from the Democrats to Republicans. They rebounded in 2018 and 2019 as Democrats retook the House of Representatives and made state-level legislative gains.

Firearms Companies Suffer ‘Trump Slump’

Gun sales decline when firearms owners don’t fear new gun control regulations. | Source: Hunter Bliss Images/Shutterstock.com

As revenues for firearms manufacturers and retailers have fallen, so too have gun stock valuations.

Despite the stock market surge, American Outdoor Brands Corp (NASDAQ:AOBC), Sturm Ruger & Company Inc (NYSE:RGR), and Vista Outdoor Inc (NYSE:VSTO) have all fared considerably worse under Trump compared to Obama.

AOBC has fallen by around 64% since Trump’s election. This contrasts sharply with Obama’s last presidential term, when the Smith & Wesson producer’s stock soared 176%.

AOBC stock soared under Obama. It’s plunged under Trump. | Source: TradingView

A similar story has unfolded for Ruger. RGR appreciated by around 41% between November 2012 and November 2016. But since the 2016 election, the stock has fallen by about 18%.

Vista Outdoor sold off its two firearms manufacturing brands, Savage Arms and Stevens Arms, in 2019. But VSTO still has significant exposure to the gun industry through its ammunition and accessory brands. Its stock is down a staggering 81% since November 2016.

Trump’s presidency has been equally-difficult for employees who work in the firearms industry. Gun-related jobs swelled 73% from 2008 to 2015, while wages soared 127%.

The opposite has happened under Trump.

In 2018, iconic weapons manufacturer Remington filed for bankruptcy but exited it shortly thereafter with hundreds of jobs lost. Layoffs later struck Miami firearms maker Taurus Holdings.

How Gun Stocks Can Weather a Trump Sequel

If Donald Trump wins a second term, most firearms enthusiasts will likely breathe a sigh of relief. But gun stock investors had better hope Democrats make gains at other levels of government.

The perfect example is Virginia, where Democrats took complete control of the state government in November. Less than two weeks into the legislative session, three gun control bills have already been approved.

According to the Richmond Times-Dispatch, firearms sales are up 47% year-over-year. Virginians purchased an estimated 73,849 guns last month, second only to December 2012 – the month after Obama won reelection.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.

This article was edited by Josiah Wilmoth.

Last modified: January 23, 2020 11:35 AM UTC

Mark Emem @cointributor

After words, numbers are my other love... mostly when they are going up and they have nothing to do with taxes or expenses. That makes green my favorite color and markets my main focus. Currently a resident of Nairobi, Kenya. Follow me on Twitter @cointributor or email kointributor[at]gmail.com

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