Will Starbucks policy boost gun stocks?

A welcome to open-carry advocates may not help the coffee chain. But acceptance of sidearms is good for gun makers.

By Jamie Dlugosch Mar 1, 2010 10:45PM

Johnny Cash wondered about the wisdom of a young farmhand’s journey to town with his gun by his side in the song, “Don’t Take Your Guns to Town.”


So I have to wonder what the Man in Black would think of those taking their guns to Starbucks?


We're not in the Wild West anymore and they're unlikely to be used, some would say. Others would say that's why sidearms aren't needed.

The question's getting a lot of discussion and debate online as gun owners nationwide test a variety of open-carry laws, some of which allow businesses to ban them. According to an Associated Press report, California Pizza Kitchen and Peet's Coffee & Tea are among the businesses that have banned customers with guns.


Starbucks hasn't.


Starbucks said in a recent statement that it follows state and local laws and has its own safety measures in its stores.


It's far from clear whether that will help Starbucks (SBUX) business, but gun makers like Smith & Wesson (SWHC) are no doubt thrilled. Such a stance is good for them.



Proponents of open-carry laws, in addition to advocating for the Second Amendment, will argue that guns so openly displayed deter crime. Gun-control advocates would likely disagree.


I won't solve that debate in this blog item. No, wearing a gun didn't save the kid in the Johnny Cash song. But in 2009, a year that saw an increase in gun sales, violent crime dropped.


It is a complicated issue.


But from a stock perspective, the idea of open-carry laws making people more comfortable with carrying weapons seems very bullish for gun makers Smith & Wesson and Sturm Ruger (RGR) in the short term.


Both of these stocks have been stuck in the mud for much of the past year despite rising gun sales. SWHC is down from a peak of $7.52 and now trades for just over $4. RGR is down from its 52-week high of $15.20 to just under $12 today.


From a valuation perspective, both of these companies are attractively priced for long-term gains. Those gains will be much quicker if gun-control noise begins emanating from Washington.


I expect both of these stocks to trade higher. I expect these 10 stocks to trade higher, too.


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