Gun Control's Impact On Your Portfolio
Nate is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Today, the Obama administration debuted its latest proposals aimed at curbing gun violence. The proposal comes in the wake of several 2012 mass shootings around the United States. I won't get into the debate over gun control here, except to point out that the shootings have provided incentive for those who advocate gun control to step up their efforts. The debate is a thrice-told tale and I won't bore you with it.
I'm here to help you think about whether you should include any weapons makers in your stock portfolio. If you have them, should you keep them? Will efforts to restrict the sale of firearms lead to decreased sales? There is usually a short-term dip in the stock prices of gun manufacturers and affiliated industries following any high-profile incident.
So should you sell, buy, hold or what? I'm telling you to buy. Two major reasons make me think so.
First, the simple fact is that America can't get enough of guns. The second amendment is, at this point, lionized in our culture. It protects the rights of gun owners to have, operate and keep firearms. Well and good, regardless of whatever else happens, no one will even make a serious attempt to ban all guns.
Second, any time something spurs the gun control debate to the front of the media, suddenly guns sell like hotcakes. And the time to get into a stock is before things go all crazy with the sales. It's time to move, and move quickly.
Here are a few gun manufacturers and related firms that you should be looking at right now.
Smith & Wesson (NASDAQ: SWHC)
Smith & Wesson is, probably, the most famous publicly held gun manufacturer in the world. The company makes rifles, handguns and all forms of related merchandise for the buyers of guns. Based in Springfield, MA, the company recently bought back $15 million worth of its own shares on top of an earlier buyback of $20 million. That's not a sign of a company that's thinking it's in trouble. I think Smith & Wesson looks for a good 2013 and beyond and is positioning itself for it. Right now the firm is trading at $8.75 (midday, Jan 16, 2013) and has been higher. It did drop a bit in December, but I think it's a strong contender to bounce back quickly.
Sturm, Ruger & Co (NYSE: RGR)
Sturm, Ruger & Company isn't as well known as S&W, but it still makes quality firearms mainly for sale in the United States. Like S&W, RGR is based in the northeast, this time in Southport, CT. The company manufactures pistols, rifles, automatic rifles, and shotguns; as well as other items, and it's done fairly well over the years. Just like S&W, the firm's stock dropped in December, but is rebounding well. From hitting a low of $40.60 on Dec. 18, 2012 it's now at $50.12. I think it's got a ways to go, too. As recently as last November is was trading at $59.80. Unlike S&W, RGR offers a dividend of 38 cents per share. Don't be fooled by the firm's $4.50 late 2012 dividend. I'm not privy to the firm's plans, but that strikes me as one of the 'avoid the coming tax hike' moves by the company's board. Count on a dividend in the upper-30 cent range.
Alliant Techsystems (NYSE: ATK)
ATK is more famous for its big defense capabilities, but the firm does have a sporting division and manufactures both weapons and ammunition for civil and military use. This is a stock more protected from the media hype currently underway regarding both gun rights and gun control due to its other pursuits. This can be seen in the fact that this is a gun stock that didn't drop much in December. Instead it's been steadily upward since July. At that point it was at$44.00. Now it's at $64.35. A little under 50% appreciation in six months. I wouldn't count on that continuing, but generally it should be good for your portfolio. The firm also raised its dividend from 20 cents per share to 26 cents per share in November.
Again, I'm not getting involved in the debate. That's not my intent at all. However, my intent is to provide some analysis that can grow your portfolio. Right now, given the media yammering, these three gun manufacturers are the way to go. I'm likely not alone in this, but it does bear repeating. Don't let the news scare you off a good thing.
Follow Nate on Twitter: @natewooley
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Nate Wooley has no position in any stocks mentioned. The Motley Fool owns shares of Sturm, Ruger & Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!