Why gun stocks soared after Obama's win
In a repeat of 2008, traders anticipated an increase in firearm sales after the election.
By Kim Peterson
In a reaction that surprised absolutely no one, investors rushed into gun stocks after President Barack Obama's win, expecting firearm sales to soar soon.
Gun makers Smith & Wesson Holding (SWHC +3.64%) and Sturm Ruger (RGR +4.90%) rose sharply Wednesday in a repeat of sorts of the response to Obama's first presidential victory in 2008. The stocks were up again in Thursday's trading. Gun stocks have performed well over the four years of Obama's term. Sturm Ruger, for example, rose from $7.04 on Election Day in 2008 to $50 Thursday.
But investors think the stocks have farther to go, propelled by fears that Obama will crack down on guns in his second term.
Sturm Ruger shares rose 6.8% Wednesday and another 4.8% Thursday. Smith & Wesson shares rose 9.6% Wednesday and another 3.8% Thursday. By comparison, the Standard & Poor's 500 Index ($INX -0.40%) fell nearly 2.4% Wednesday and was down slightly Thursday.
The National Rifle Association certainly contributed to fears of expanded gun control in Obama's second term. "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," the association's CEO, Wayne LaPierre, wrote on the group's website. "They're a near certainty."
But Obama hasn't taken much action on gun control. In fact, he signed legislation allowing loaded guns into national parks and on Amtrak trains. Still, in the second presidential debate, Obama mentioned the possibility of keeping automatic weapons out of the hands of criminals and the mentally ill.
"Part of it is seeing if we can get an assault weapons ban reintroduced, but part of it is also looking at other sources of the violence, because frankly, in my hometown of Chicago, there’s an awful lot of violence, and they’re not using AK-47s, they’re using cheap handguns," he said.
That comment may have triggered a consumer fear that gun sales will see tighter regulations. In October, the number of federal background checks on potential gun buyers rose 10.6% from the month before to 1.61 million, according to the FBI.