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.

By Kim Peterson Dec 11, 2012 9:48AM
Credit: Seth Perlman/AP
Caption: Steve Swartz, owner of Capitol City Arms Supply, shows off some of the rifles for sale in Springfield, Ill.,Updated 5 p.m. ET

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.

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144Comments
Dec 11, 2012 3:20PM
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IF THAT FIREARM IS SOLD TO ANOTHER BUYER THE ORIGINAL BUYER MAY BE SUBJECT TO CRIMINAL PROSECUTION IF THE FIREARM IS USED IN THE COMMISSION OF A FELONY====
 
Only if you don't keep proof of sell.
Dec 11, 2012 3:19PM
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Wow lot of rednecks here.  That word "gun" really turns you on huh?  BTW how many restrictive laws did Obama put in place during his first term?  Would it be zero?
Dec 11, 2012 3:12PM
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People that are smart enough to buy guns probably already have.  So it makes sense that sales will fall, profits will fall, and stocks will fall.  Easy problem.
Dec 11, 2012 3:08PM
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Hell,  we need more gun laws, they the libs. say! They "the governmet"e cannot or do not inforce the current gun laws! Do Not Give Your Second Amendment Rights Away!!!!!!
Dec 11, 2012 2:59PM
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When you are confronted with an armed "bad guy" and seconds count, the police are only minutes away.  I will continue to rely on myself and my defense pistol of choice for the day. Thankyouverymuch.

Dec 11, 2012 2:59PM
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watch the episode on Current TV about the Philadelphia gun dealer selling assault weapons in Penna and taken accross the bridge to New Jersey by profiteers selling to whoever....amazing...we need assualt weapons in this country like we need more terrorists...Same thing applies to the state of Texas...........Ban them
Dec 11, 2012 2:59PM
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Don't count on a correction soon.  The reason gun stocks are down is because Clinton and Obama are pushing bills to bring the U.S. in line with the United Nations Small Arms Control Act.  If this happens gun manufacturer will see their sales go off a cliff.  No one will want to buy guns if you have to go through a pile of red tape and in-home inspections just to own one.

 

For those of you wishing to protect your 2nd Amendment rights, I urge you to contact your Senators and Congressmen now.  The U.N. gun control provisions are a serious infringement of our constitutional rights if enacted here in the U.S.

Dec 11, 2012 2:53PM
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I purchased my first gun when I was 12 years old with money I made selling boiled peanuts in a small town in S.C.  If it matters I am now 70 and own several guns and plan on buying a pistol for my wife and teach her how to use it so that if anyone makes an attempt to rob or kill her she will at least have a fighting chance.  I am a Viet-Nam vet, own my own business, never received federal aid and worth several million dollars.  If and when anyone comes to take my guns, my heart goes out to the first few because they will receive my bullets prior to my guns.  So, which part of this makes me a "red-neck"?  Or is it just because I happen to be white. 

Dec 11, 2012 2:52PM
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Quote:
"
 
AMERICA IS DYING!!!
OBAMA IS DRIVING NAILS IN YOUR COFFIN AS WE SPEAK!!!!!
HELL - THE WHOLE US GOVERNMENT IS HELPING HIM - ALONG WITH THE MEDIA - STUPID VOTERS - HILLARY - MUSLIMS - THE 47% - DETROIT - AND TOO MANY OTHERS TO NAME!!!

ENJOY LIVING WITHOUT YOUR GUNS - HILLARY WILL SEE TO IT!!!!! "

Response:
One can always hope.
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I own guns, lots of them.  I also know a number of people that shouldn't own guns.  If they can ever come up with a law that takes guns away from them, and I get to keep mine, I'll be for it.  Until that time, they'll continue to worry me, and I think I'll be holding onto mine.
Dec 11, 2012 2:47PM
Dec 11, 2012 2:39PM
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You can sure tell what post's the left reads and comments on.  Must be afraid of something
Dec 11, 2012 2:35PM
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price of gas went down and it rained yesterday
Dec 11, 2012 2:34PM
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when they come take the guns, then they also already have the gas chambers waiting to fill right here in the good free USA., 
Dec 11, 2012 2:32PM
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Funny 2 me how:

1.) This issue drives so many to irrational extreme views (both sides, but far more really impossible views on the side of gun rights)

2.) Pro gun wackos are absolutely certain that Obama is coming for their guns, and the U.N. would use mind control if it could (no...wait...some are actually SAYING that) to pry all of their guns out of their dead, flag defending claws

3.) That there is no place in our legal system for any kind of restrictions on ANY kind of gun or gun accessory (insert mega-clips here...fools)

 

Dec 11, 2012 2:27PM
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OK....so I am with many of the self proclaimed RED NECKS posting.  I work hard every day.  Pay my taxes, feed my kids, and make sure I save for my own retirement.  I am proud to say I make sound decisions and do not need Uncle Sam to hold my hand.  I also do not need Uncle Sam to tell me what to feed my kids, how to get them to do better in school, and what a work ethic is.  Since my daddy was not rich...and no one paid for my college...I had to stop going.  From a solid work ethic and common sense I have achieved the American Dream of making very good money...and enjoying my life. 

I get tired of someone in some big city...telling me what I / WE need to do different to solve problems I nor my community have.  Live your life and let me live mine.  You don't want a gun...great...keeps the price down on the ones I want to buy.  You want someone to tell you how to feed your kids or get them to attend school....find a help group (plenty of NGO's to help).

 

But understand...MRS FOXY...I DO NOT NEED SOMEONE TO HELP ME WITH COMMON SENSE THINGS.  I grew up in a part of the country that common sense is still COMMON.

Dec 11, 2012 2:16PM
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Question. How much did stocks gain when firearm purchases skyrocketed? And are the stocks lower today than they were prior to the sales explosion?

Dec 11, 2012 2:11PM
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Zzzzzzzzzzzzzzzz....same old rhetoric from both sides of this issue.  The NRA and its minions continue to spew stale propaganda (much to the delight of the GOP) and the people who never owned or shot guns quake in fear at the sight of them.  There is some common sense middle ground on the issue of gun control, but I doubt if I'll ever see it in my lifetime. 
Dec 11, 2012 2:09PM
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The New world order wants you gunless for a reason...! They want to control your life and freedoms given by god to be free and soverign individuals. This New World Order crazies want to make you into slaves....in debt for your entire life from student load to bad investment and 401K's rip offs...and kill you as you get ready to retire with: Recreational drugs, smoking, unhealthy fast foods,bad drugs side effects, as you retire so they cut and reduse their Social Security liabilities......Your a worthless eater at that point and they want you dead. Depopulation foundations around the world have been gearing up for the final blow in the next 5 years....GET READY AND DEFEND YOURSELVES....!!!! THEY WILL TRIGGER A WORLD WAR...IF THEY HAVE TOO....!!!
Dec 11, 2012 2:09PM
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So I guess that back in 1863 during the War between the States, musket ball sales were booming along with Gatlin gun puchases!! It's 2012 people... give peace a chance ! from the Beatles tune back in the late 60's.
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