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Market analyst advises buying in the ‘Trump slump’

Tuesday, March 28, 2017 4:27
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Financial writer and market analyst Rich Duprey argues the rumored “Trump slump” should be no reason to avoid investing in gun manufacturers — rather, it’s a perfect time to buy, he said Monday.

“If people aren’t buying guns, manufacturers can’t profit, and their stocks will tank,” he wrote in an article published by the Motley Fool, an international investor service. “While there is indeed a slowdown under way and the stocks of gunmakers have borne the brunt of it, the industry is inherently cyclical and the current downtrend is nowhere near as apocalyptic as has been portrayed.”

Duprey said the three top publicly traded gun companies — American Outdoor Brands, Sturm Ruger, and Olin — are still worth the investment due to “strong management teams and otherwise great operations.”

His sentiment was echoed earlier this month by the National Rifle Association and reinforces a long-term trend identified by the National Shooting Sports Foundation that despite last year’s record breaking gun sales, the industry isn’t falling apart.

“Comparing current data to the record high points doesn’t prove that sales have plummeted,” the NRA said. “It does indicate that the number of background checks performed – and so the number of permit applications and/or firearms purchases – is still at near-record levels.”

Checks processed through the FBI’s National Instant Criminal Background Check system serve as a proxy for gun sales nationwide — though not every application correlates to one firearm sold.

Some applicants buy more than one gun at a time and others may just be applying for a concealed carry permit. For these reasons, and some industry analysts — including the NSSF — calculate an “adjusted” figure, which subtracts non-sales related checks from the total monthly number.

Firearms dealers processed just shy of 1.3 million adjusted background checks through NICS in February, a 25 percent increase over January, but still 12 percent behind the same month last year — the system’s biggest ever.

A review of adjusted NICS totals shows last month was the third busiest February on record, though 2016 didn’t land at number one, either.

In February 2013, NICS processed more than 1.6 million adjusted background checks — 147,000 more than in the same month last year. The data correlates with a five-month spike in background checks in 2013 that spanned from January through May.

While it’s impossible to pinpoint an exact cause for the spike, an increase in sales is sometimes linked to mass shootings and the political climate. Both may have factored into the 2013 boom, which followed the December 2012 Sandy Hook shooting and the re-election of Barack Obama.

NICS data shows background checks overall have been increasing steadily over the last two decades and don’t appear tied directly to any presidential administration or political party.

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