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Gun, Ammo Sales Soar as New Regulations Feared

Weapon stocks tumble, but may be oversold

By Antonio Perez
Epoch Times Staff
Created: December 24, 2012 Last Updated: December 30, 2012
Related articles: Business » Global Markets
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Lt. Ray Mesek registers a Colt AR-15 at a gun buyback event at the Bridgeport Police Department's Community Services Division on Dec. 22 in Bridgeport, Connecticut. The recent massacre at Newtown, Conn. has flamed talks of gun-control, while manufacturers report that gun sales are surging to new records. (Spencer Platt/Getty Images)

Lt. Ray Mesek registers a Colt AR-15 at a gun buyback event at the Bridgeport Police Department's Community Services Division on Dec. 22 in Bridgeport, Connecticut. The recent massacre at Newtown, Conn. has flamed talks of gun-control, while manufacturers report that gun sales are surging to new records. (Spencer Platt/Getty Images)

Firearms and ammo sales have soared in recent weeks after the Newtown, Conn. school shooting tragedy, as gun enthusiasts fear that certain semi-automatic weapons and magazines would soon be banned.

A semi-automatic Bushmaster AR-15 rifle, among other weapons, was responsible for the death of 28 individuals—including 20 children—in the Sandy Hook Elementary School shooting perpetrated by a troubled 20-year-old youth.

The tragedy renewed political and popular resolve for gun-control, especially assault-type weaponry and semi-automatic weapons similar to those used by the military.

Sales Surging

These sentiments prompted a run on gun and supply businesses, with many locations reporting record sales in December.

According to an AFP report, gun-ownership registration in the state of Florida surged, pushing the official number of registered gun owners to a new record.

Brownells Inc., the world’s largest supplier of firearm accessories and supplies, released a statement on enthusiast website AR15.com, apologizing for the delay in fulfilling orders due to a demand surge during which the company sold 3.5 years’ worth of gun magazines in a span of 72 hours.

“The demand for magazines actually exceeded the ability for the system to keep up with the volume that was being ordered,” wrote Brownells President Pete Brownell in a forum posting. “We’re working like crazy to get these orders to you as quickly as possible.”

Fear of legislation doesn’t solely contribute to the uptick in gun and ammo sales. Experts say that the need for self-defense could also trigger a gun sales surge following a mass shooting.

Multi-Billion-Dollar Industry Booming

This year was already among the highest on record for gun sales.

According to the FBI website, background checks for gun ownership reached more than 16.8 million through the end of Nov., the most since 1998, when FBI began tracking such data. Although that figure was for background checks, the number of weapons sold could be greater.

The firearms industry in the United States is a multi-billion-dollar industry, providing $31.8 billion of economic activity and creating 209,750 jobs in 2012 alone, according to data from the National Shooting Sports Foundation (NSSF). The recent economic recession posed little threat to the industry, with sales increasing annually from 2008 to 2011, according to NSSF.

Stocks Declining

Although gun sales have been strong, shares of weapon manufacturers have declined in recent days due to political headwinds of stricter gun-control negatively affecting forward valuation.

As of Dec. 24 close, shares of Smith & Wesson Holding Corp. (Nasdaq: SWHC) has fallen 24.5 percent since Nov. 30, eroding $173 million in market capitalization. Similarly, shares of competitor Sturm, Ruger & Co. (NYSE: RGR) also fell 24.3 percent during the same period.

Both companies are also among the most actively shorted stocks during the last two weeks. But some market watchers believe that the stocks may be oversold. While an assault-rifle weapons ban may be passed in the future—prompting further surge in demand in the interim—these two manufacturers earn most of their revenues and profits on non-assault-style weapons, defense, and law-enforcement devices, and the recent decline may be an overreaction by market participants.

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