But yet, two stocks, SWHC (Smith and Wesson Holdings) and RGR (Sturm Ruger), two Gun and Ammunition companies, have gained 45.8% and 39.8% respectively.
Despite the Current Bear Market, we have had a Bull Market in Guns and Ammunition.
Different Articles, such as from Minyanville, have attributed this boom to two main factors:
- The new Democratic U.S. Administration is traditionally not friendly to gun rights and gun owners.
- Worsening economy increases crime and mayhem encouraging people to buy firearms and ammunition.
Anecdotal evidence also shows the high demand. This Orlando Sentinel article has said that sales of ammunition have been flying off the shelves and there is a high demand for it.
The FBI has reported that background checks on potential firearms purchasers increased 41.6% from November 2007 to November 2008.
Even the earnings report from handgun maker Sturm Ruger (RGR) suggests this national trend. Demand is so high, Sturm Ruger reported over 175,000 of 776,000 units ordered were on back order. Over the last year, the order book grow almost 50% from $156 million to $223 million.
SWHC (Smith and Wesson) is a small capitalization stock ($179 million) with a PE (Price to Earnings) ratio of 13, and a 5 year estimated growth rate of 21.7% for a Price Earnings to Growth Ratio (PEG) of 0.60 (PEG > 2 is expensive, PEG < 1 is a good deal).
RGR (Sturm Ruger) is also a small capitalization stock ($191 million) with a forward PE ratio of 24.
Both stocks appear to have broken out recently out of bases
The trends remain strong, but how long will it last?
If the economy and stock market continue to worsen, higher unemployment would lead to higher crime rates, which can boost sales of guns and ammunition.
We could also currently be in a secular Bear Market that started in 2000 and will end sometime around 2016 or 2017.
Today's SWHC Stock Chart
Today's RGR Stock Chart
Today's CAB Stock Chart
Performance Comparison of SPY, IWM, SWHC, RGR, and CAB
Cabela (CAB), is a retailer of outdoor items such as hunting, fishing and camping equipment.