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You would think President Obama’s proposed gun laws aimed at banning certain types of semiautomatic weapons and high-capacity magazines would be impacting gun-making stocks in a very negative way.
So far, that’s not the case.
Shares of Sturm, Ruger (NYSE: RGR) and Smith & Wesson (NASDAQ: SWHC) – the two largest publicly traded gun manufacturers in the U.S. – are soaring today. As of 3 p.m. eastern, both stocks were up more than 4%, with most of those gains coming after the President’s mid-day White House announcement.
Sounds like investors in the two major gun companies were either relieved that Obama’s proposal for new gun laws weren’t stricter – or that the effects of any sort of firearms ban was already baked into the share prices.
A quick look at the month since the horrific shooting at Sandy Hook Elementary, however, disproves the latter theory. The two stocks are up an average of 6% since 20 first-graders and six adults were shot dead in Newtown, Connecticut on December 14.
Sturm, Ruger shares, strangely, have risen 10% since that nightmarish day, falling only in the three days that followed the Newtown tragedy before rallying in a big way.
Today’s additional gains clearly show that investors were bracing for even stronger gun-control laws. That seems like an odd statement given that Obama’s proposal calls for the most drastic changes to gun laws in nearly two decades.
But in light of the national outcry since Sandy Hook, these gun-control measures seem almost modest. Whether the new gun laws pass through Congress is another story.
The outcome of that Capitol Hill battle will ultimately determine the fate of the gun manufacturers mentioned above.