Why are gun stocks tumbling?
It's unclear what's triggering the recent plunge in shares of Smith & Wesson and Sturm Ruger. We may be seeing a correction after a runup around the presidential election.
Gun stocks are seeing the post-election blues.
Shares of Smith & Wesson (SWHC) and Sturm Ruger & Co. (RGR) recovered slightly Tuesday from some pretty steep declines over the last week. Smith & Wesson's stock price finally turned up by 4% Tuesday after sliding 13% over two trading days. Sturm Ruger rose less than 1% after suffering a 17% drop in the last week.
It looks like these stocks are correcting to levels seen before the November presidential elections. Investors jumped into these stocks as the election approached, figuring they would rise as shoppers stampeded into gun stores. And that did happen: Gun dealers made a record number of background-check requests on Black Friday, with 154,873 requests going to the FBI's call centers.
No one totals the actual number of guns sold, but those background-check requests are a good sign that firearms were flying out the doors.
But as the Motley Fool's Sean Williams points out, gun orders tend to return to normal levels after the elections are over, and "investors realize that they've bid shares up far beyond the gun makers' potential."
Some gun buyers are fearing a crackdown on firearms by President Obama, who suggested in one of the presidential debates that he was in favor of reintroducing an assault weapons ban. The National Rifle Association is fanning those fears, featuring a commentary on its site from CEO Wayne LaPierre saying that "an anti-gun Supreme Court, a U.N. Arms Trade Treaty, and a sweeping gun ban aren't just a possibility in a second Obama term. They're a near certainty."
Investors were speculating all day Monday about why gun stocks were down. "Ironically, the gun plays are quickly turning into falling knives," wrote one trader on Twitter. Another said that Sturm Ruger is "doing what it always does, runs like crazy then corrects very hard -- good poster child for why chasing is stupid." Still others said the correction was overblown, and that gun stocks would recover soon.
More from Money Now
- What Cory Booker is learning about food stamps
- FedEx's busiest day ever: 200 packages a second
- Google's $2 billion tax dodge
"an anti-gun Supreme Court, a U.N. Arms Trade Treaty, and a sweeping gun ban aren't just a possibility in a second Obama term
attack of the killer tomatoes, invasion of the undead, end of the Mayan calendar
ANNOUNCER: Let's face it.
Your kids are gonna get into your guns. That's a fact.
Gun accidents can be avoided by introducing your children to guns as early as possible.
Hi, I'm Petey the Pistol. Do you ever get Ionely?
Me, too. Hold me.
If you squeeze me, I make bad people go away.
Wait a minute. I thought guns were bad.
ANNOUNCER: False! Guns are good.
In fact, did you know that Jesus and Moses used guns to conquer the Romans?
So, remember, guns don't kill people, dangerous minorities do.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The Nasdaq Composite (+0.5%) and S&P 500 (+0.2%) posted modest gains on Thursday, but not before enduring a morning dip into the red, which took place in reaction to reports indicating Russia has commenced military exercises on the Ukrainian border.
The news from Europe knocked the key indices from their early highs, while giving a boost to safe-haven assets like gold futures (+0.5% to $1290.80/ozt), Treasuries (10-yr yield -1 bps to 2.69%), and the Japanese yen (102.30 ... More
More Market News
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'