Socially conscious investors may want to stop reading. But the fact is that gun stocks were some of the best-performing stocks at the onset of the coronavirus pandemic. And they continue their positive momentum.
Some of that may be historical. Firearms sales tend to increase during an election year. But of course, this has not started out as a normal election year.
In March, the nation was gripped by pictures of long lines outside gun stores in several U.S. states. The website Ammo.com reported that bullet sales increased by 222% in the period from February 23 through March 15 as opposed to the first three weeks in February.
And according to the Federal Bureau of Investigation’s (FBI) National Instant Criminal Background Check System (NICS), there was a 73% year-over-year increase in background checks in February.
“The world has never seen anything like this and people want to make sure they're prepared for whatever lies ahead, whether that be food shortages, government shutdown, or worse," a spokesperson for Ammo.com said in an emailed statement. "When everything around you is uncertain, having a supply of ammunition can make our customers feel safer."
Given the likelihood of increased firearms sales, we’ve created this presentation that highlights seven gun stocks that you should consider for your portfolio.
Quick Links
- American Outdoor Brands
- Sturm Ruger
- Vista
- Olin Corporation
- Sportsman’s Warehouse
- Big 5 Sporting Goods
- Axon Enterprise
#1 - American Outdoor Brands (NASDAQ:SWBI)
Shares of American Outdoor Brands (NASDAQ:SWBI) are up over 26% in the last six months. This is important to consider when thinking about gun stocks. SWBI stock was on the rise well before the nation first heard about a mysterious virus coming out of Wuhan, China.
If you’re new to gun stocks, American Outdoor Brands is the parent company of the iconic firearm brand Smith & Wesson. In fact, that was the company’s name until the beginning of 2017. At that time, the company wanted to have a name that better reflected the breadth of its product line which had grown to include outdoor gear and sporting goods.
However, the company still manufactures firearms. And the Smith & Wesson name is still one of the leading national brands. Since 2017, firearm sales have increased every year by a significant margin. Still, the company has announced plans to make a clear separation of its firearms business from the rest of the business.
The company is not widely covered by analysts, but it does have a consensus buy rating. And with a consensus 12-month price target of over $11 per share, there’s a lot of upside for SWBI stock, particularly during an election year which has been historically good for firearms sales.
About Smith & Wesson Brands
Smith & Wesson Brands, Inc designs, manufactures, and sells firearms worldwide. The company offers handguns, including revolvers and pistols; long guns, such as modern sporting rifles, bolt action rifles; handcuffs; suppressors; and other firearm-related products under the Smith & Wesson, M&P, and Gemtech brands.
Read More - Current Price
- $12.99
- Consensus Rating
- Buy
- Ratings Breakdown
- 2 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $18.00 (38.6% Upside)
#2 - Sturm Ruger (NYSE:RGR)
Like many consumer products, you get what you pay for in the firearms industry. That brings us to Sturm Ruger (NYSE:RGR). Sturm Ruger’s products are known for their reliability and craftsmanship, but that also means that they are among the most expensive in the industry. If this were a typical election year, that factor might make Sturm Ruger less attractive.
But with the coronavirus sparking panic selling, it seems clear that there will be a market for Sturm Ruger products. In March, when the uncertainty surrounding the coronavirus was at its apex, Sturm Ruger and other firearms manufacturers saw sales increase.
Like many gun stocks, RGR stock does not draw much attention from analysts. Firearms manufacturers have fallen out of favor with many investors. Still, the stock is up nearly 15% for the year. And the one analyst that has offered a rating gave the stock a buy with a price target that suggests the stock still has some room to run. As of this writing, RGR stock is comfortably above both its 50- and 200-day moving average.
And while it’s fair to say that sales should decrease as firearms stores are labeled as non-essential businesses, there is sure to be pent-up demand as the American economy begins to slowly reopen.
About Sturm, Ruger & Company, Inc.
Sturm, Ruger & Company, Inc, together with its subsidiaries, designs, manufactures, and sells firearms under the Ruger name and trademark in the United States. The company operates through two segments: Firearms and Castings. It provides single-shot, autoloading, bolt-action, and modern sporting rifles; rimfire and centerfire autoloading pistols; single-action and double-action revolvers; and firearms accessories and replacement parts, as well as manufactures lever-action rifles under the Marlin name and trademark.
Read More - Current Price
- $37.36
- Consensus Rating
- Strong Buy
- Ratings Breakdown
- 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#3 - Vista (NYSE:VSTO)
Before the world virtually stopped, Vista (NYSE:VSTO) posted strong first-quarter earnings in early February. The company was seeing strong ammunition sales as well as its other products that support firearms purchases.
Vista is not a pure-play gun stock anymore. In July 2019 the company sold off its Savage Arms and Stevens firearms brands. In the short term, that may have hurt the stock as gun sales have taken off. But, as its last earnings report shows, the company is still benefiting from strong ammunition sales. That may work in the company’s favor.
Throughout the coronavirus pandemic, states have been left to their own devices as far as how to handle the definition of an essential versus non-essential business. That means that in some states at least ammunition sales are still being allowed. So while it may become harder to buy ammunition in some areas of the country, in other states it will be (relatively) business as usual.
And business is brisk. VSTO stock is up nearly 30% for the year. Like other gun stocks it is trading above both its 50- and 200-day moving averages suggesting that the stock is still in a bullish pattern.
About Vista Outdoor
Vista Outdoor Inc designs, manufactures, and markets outdoor recreation and shooting sports products. in the United States and internationally. The Kinetic Group segment designs, develops, distributes, and manufactures ammunition, primers, and components for hunters, recreational shooters, federal and local law enforcement agencies, and the military.
Read More - Current Price
- $44.15
- Consensus Rating
- Hold
- Ratings Breakdown
- 0 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $41.20 (6.7% Downside)
#4 - Olin Corporation (NYSE:OLN)
Moving even further away from pure-play gun stocks is Olin Corporation (NYSE:OLN). The company is better known as a manufacturer and distributor of chemical products. Unlike many of the stocks in this presentation, OLN stock is down for the year as is the entire sector.
But to understand why Olin is on this list, you have to look a little closer. The company is primarily known for its Chlor Alkali Products and Vinyls segments, both of which are down this year. However, it also has a Winchester segment (yes, that Winchester) that supplies ammunition products for hunters and recreational shooter as well as law enforcement agencies.
And that segment is set to provide a catalyst. The United States Army awarded Winchester a contract to manage and operate the Lake City Army Ammunition Plant in Independence, Missouri. This will be a multi-year contract that should contribute to the company’s annual earnings as early as this calendar year.
Because Olin has only a peripheral exposure to the gun industry, its stock is reviewed by more analysts. The 14 analysts that have offered opinions of the stock in the last 12 months give the stock a hold and a price target of just over $17. That would be a gain of over 24% from the stock’s current level.
About Olin
Olin Corporation manufactures and distributes chemical products in the United States, Europe, Asia Pacific, Latin America, and Canada. It operates through three segments: Chlor Alkali Products and Vinyls; Epoxy; and Winchester. The Chlor Alkali Products and Vinyls segment offers chlorine and caustic soda, ethylene dichloride and vinyl chloride monomers, methyl chloride, methylene chloride, chloroform, carbon tetrachloride, perchloroethylene, hydrochloric acid, hydrogen, bleach products, potassium hydroxide, and chlorinated organics intermediates and solvents.
Read More - Current Price
- $40.81
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $51.86 (27.1% Upside)
#5 - Sportsman’s Warehouse (NASDAQ:SPWH)
There are many ways to play gun stocks. One way is to invest in companies that specialize in selling guns (i.e. gun stores). That’s what you have in Sportsman’s Warehouse (NASDAQ:SPWH). To be clear, Sportsman’s Warehouse sells more than just guns, but it does sell guns. In an environment where retail stores may be slower to open, and when they do may have to limit traffic for social distancing purposes, this may not be a great short-term play. However, considering that many Americans are anxious to get a boat in the water or to start swinging the clubs, it’s not hard to imagine that these stores may get some traffic.
While SPWH stock is down for the year, it’s moved sharply higher in the last month. This is happening despite the fact that many states have issued strict sheltering in place policies that are forcing the closure of some Sportsman’s Warehouse locations.
The stock has been reviewed by five analysts in the last 12 months. The stock has a consensus buy rating and a price target of over $9 per share which represents a gain of nearly 40% from the stock’s current levels.
About Sportsman's Warehouse
Sportsman's Warehouse Holdings, Inc, together with its subsidiaries, operates as an outdoor sporting goods retailer in the United States. It offers camping products, such as backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents, and tools; and apparel products, including camouflage, jackets, hats, outerwear, sportswear, technical gear, and work wear.
Read More - Current Price
- $2.09
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 3 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $2.80 (34.0% Upside)
#6 - Big 5 Sporting Goods (NASDAQ:BGFV)
Like Sportsman’s Warehouse, Big 5 Sporting Goods (NASDAQ:BGFV) is not a gun manufacturer, but a retailer. And they’re not even a major seller of handguns. The company mostly deals with shotguns and bolt-action hunting rifles.
As you might expect then, BGFV stock has not benefited in the same way as some other gun stocks. But it has ticked up a little in the past month. Like all retailers, Big 5 will be feeling the pinch of store closures and less foot traffic while the country stays sheltered in place. However, because they sell more than guns, they may benefit from increased demand.
For example, many customers may be looking to Big 5 stores as a way of building up their home gym equipment. And as they do, some of those customers may find the store a more “discreet” alternative to shopping at a gun store.
Analysts have stayed away from BGFV stock. And of all the stocks in this presentation, BGFV’s stock chart is the only one to show the bearish death cross. Those are more than ample reasons to stay away from the stock. After all, none of the stocks in this presentation are really expensive. However, with the share price at penny stock levels, the stock may be an interesting contrarian play.
About Big 5 Sporting Goods
Big 5 Sporting Goods Corporation operates as a sporting goods retailer in the western United States. Its products include athletic shoes, apparel, and accessories. The company also offers a selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, and winter and summer recreation, as well as home recreation.
Read More - Current Price
- $1.63
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - Axon Enterprise (NASDAQ:AAXN)
Axon Enterprise (NASDAQ:AAXN) is not a gun stock per se. The company is a manufacturer of Tasers, the weapons that fire electric shocks instead of bullets. Some customers who may be squeamish about owning a gun may not have the same objection about owning a Taser. In fact, Tasers can be an important self-defense weapon that carries less stigma (and fewer regulations) than conventional firearms.
But the company is also becoming a disruptive presence to law enforcement with the development of body scanners and dashboard cameras all of which the company is bundling into subscription-based software packages. By being budget friendly, the company has a predictable revenue stream and, for now, has a significant moat as other companies are not in this space yet.
Right now, AAXN stock is a bit of a contrarian play with crime in many areas being lower as more and more Americans are sheltering in place. But that could change for a number of reasons, and therefore AAXN looks to be a solid buy-and-hold play that should reward investors as the American economy reopens.
About
- Current Price
- 0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
Fear is one of the primary drivers of buyer behavior. And so it is that many Americans are fearful of the unknown. There are many unanswered questions. And there is a growing fear that politics may trump (no pun intended) pragmatism in determining when the country will open up. This has created a 309% revenue increase on sites like Ammo.com. These sales, according to the site, are being fueled by coronavirus fears.
Or are they? Since 2017 firearms sales have moved higher every year. In 2019 alone, the FBI recorded an 8.3% increase in background checks than in 2018. This suggests that interest in gun and ammunition sales has been on the increase for quite some time.
Still, there does seem to be evidence that 2020 may be a great year for sales simply due to the coronavirus. According to Mark Oliva, director of public affairs for the National Shooting Sports
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