In December 2012, a gunman burst into Sandy Hook Elementary School in Newtown, Connecticut, and shot 26 people dead. Two years later, sales of guns and ammunition are off the charts.
That’s surprising, to say the least. After all, a lot of people thought that Sandy Hook might be a turning point for the gun control movement in America. Investors sold off shares of publicly traded gunsmiths Smith & Wesson (SWHC) and Sturm, Ruger (RGR) in the wake of the tragedy. Retailers of guns and ammunition — Cabela’s (CAB) and Dick’s Sporting Goods (DKS), and even the much more diversified retailer Walmart (WMT) all experienced slumps in share price post-Newtown. Dick’s went so far as to suspend gun sales to consumers for a time. Private equity house Cerberus Capital Management made plans to exit the guns business entirely, by selling its interest in privately held arms manufacturer Freedom Group.
And yet, according to a new poll out of Pew Research, the percentage of Americans who say they support “the right of Americans to own guns” hit a new high last year, with 52 percent in favor. That’s up 7 percentage points since the shootings at Newtown. Up 20 percentage points since the Virginia Tech shootings in 2007. It’s nearly twice the level of support for gun rights at the time of the Columbine shooting in 1999. And support for gun rights is only growing stronger.
Indeed, according to Pew, support for gun rights probably should be even higher than it already is. In a separate question, Pew asked the same 1,507 adults “whether gun ownership in this country does more to protect people or put people’s safety at risk.” 57 percent responded that guns do more to protect people. Logically, those five percentage points-worth of voters who think guns are more of a good thing than a bad thing but who don’t yet favor gun ownership seem good candidates for changing their minds on the latter — and joining the gun-rights camp.
What It Means to You
Note that Pew Research didn’t go into the merits of the gun debate, only noting how attitudes toward gun ownership are changing in this country. But these findings alone are enough to raise implications for you and your money. They basically break down as follows.
For gun owners: A rising tide of favorable opinion toward gun ownership makes tightened gun regulation unlikely. This could be good or bad, depending on whether you want to buy a gun or already own one.
Generally speaking, the looser the regulations on buying a handgun, the easier and cheaper it will be to buy one. So Americans’ laissez-faire attitude toward guns should be a plus for prospective gun buyers. Conversely, though, if you bought a gun during one of the recent regulation scares, you may soon begin realizing that you overpaid. Prices have already come down sharply from the highs reached post-Newtown. They could come down further — hurting the resale values of any firearms you already own.
For gun investors: There’s similar “contrary to what you might think” news for investors in gun stocks. While it’s certainly true that easier access to guns will streamline the retail trade in guns, it may also diminish the urgency some consumers feel to buy a gun “quick — right now — before they make it illegal!“
Manufacturers of handguns such as Smith & Wesson and Sturm, Ruger have both experienced sharp rises in sales and profits — and share prices — in recent years, as gun buyers flocked to gun stores after Barack Obama was elected president, then after he was re-elected, and then after the Newtown shootings occurred. In fact, pretty much any event that can be interpreted as raising the risk of increased gun regulation tends to inspire a “run on the bank” that can leave shelves bare at gun stores.
In the short term, therefore — meaning, until the next gun-related tragedy, and until Americans’ attitudes towards gun control start to zig instead of zagging — pro-gun sentiment should work as a con for investors who own gun stocks.
Motley Fool contributor Rich Smith owns guns and occasionally owns guns stocks, too — when the price is right. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.