Will crime drop keep gun sales rising?
Gun maker stocks have fallen in anticipation of a slowdown in sales. Crime statistics may support more sales growth.
According to the Federal Bureau of Investigation (FBI), violent crime dropped in the first half of 2009.
Murders fell by 10% during the first half of the year as compared to the same period in 2008. Robbery and forcible rape dropped by 6.5% and 3.3% respectively.
Of all the things we have to be thankful for in 2009, a drop in these horrible crimes has to be at the top of the list.
At the same time, gun sales were surging, a fact pro-gun advocates have already connected to the drop in crime.
Are they really correlated? I'll leave that to others, but the possibility might be enough to help gun makers and their stocks in 2010.
I know that if I was running the marketing department for any gun maker, I would use these recently released statistics to promote the positive benefits of gun ownership. The impact could be really huge.
Imagine converting a significant portion of the population into gun advocates.
Gun maker stocks like Smith & Wesson (SWHC) and Sturm Ruger (RGR) have suffered of late due to the expectation that sales gains seen in 2009 will slow down.
But sales might stay strong, or even grow, if enough people are convinced more guns sales helped lower violent crime rates.
This reinforces my investment thesis for the gun makers next year.
In fact, I have made Smith & Wesson one of my Top Stocks for 2010 based on a number of reasons apart from this one. (Read "Smith & Wesson might make your day" for more on my view of this stock). Perhaps I should add the possbility that gun sales helped cut violent crime.
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The offering could become the second-biggest this year if underwriters exercise an option to buy more shares.
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