Once again, gun buyers
Wall Street analysts think the gun boom is over, but there's something they're not seeing to suggest otherwise. Image source: Flickr via zombieite.
Although the firearms industry proved analysts wrong, in light of Republican nominee Donald Trump's upset victory in the presidential race -- and the subsequent sell-off in gun stocks -- it is right to ask just how much higher can gun buyer demand run?
Not looking at the big picture
The problem, of course, with Wall Street's analysis was they missed the anomalies that were occurring in individual criminal background-check numbers. An FBI
October's numbers were something of a reversion to the mean, but they might have been distorted, too, this time to the high side. After all, Kentucky reports on average 120,000 checks every month, but last month it reported 173,000, probably from a backlog. Most of the other states with anomalies, however, all seemed to be back on track.
And according to some, Trump's electoral victory ought to serve as something of a pressure relief valve for gun buyers who were fearful that President Obama -- and Democratic nominee Hillary Clinton, should she have prevailed -- would enact strict laws on access to firearms. With Trump purportedly expected to offer more gun owner-friendly prescriptions to reduce gun violence in the country, the need to go out and buy a gun now -- today! -- is not as imperative.
Image source: Getty Images.
A hidden flaw
Yet that sort of logic ignores what gun buyers were actually buying. When you look at the most popular guns that Smith & Wesson, Sturm, Ruger (NYSE: RGR), Glock, Sig Sauer, Beretta, and others were selling, they weren't just the ones you'd expect to be most targeted by tough gun-control measures, but also included those designed for concealed carry and personal defense.
Ruger's second-quarter sales, for example, were indeed driven by demand for its Precision Rifle and the AR-556, but also its concealed-carry option, the LC9s. President and COO John Killoy told analysts during the earnings conference call with analysts that those three weapons helped push new product sales to $103 million, or 30% of all firearms sales for the first six months of the year, but the percentage was destined to fall next quarter, as the AR and the LC9s dropped out of the "new product" category. That means they have an outsize impact on Ruger's results, and there's no reason to suspect the CCW weapon, in particular, won't continue to influence sales.
Smith & Wesson has similarly pointed to its small CCW M&P branded handguns as a reason behind the 38% increase in firearm sales it notched in its fiscal 2017 first quarter. During its own call with analysts in September, CFO Jeff Buchanan said its most popular weapons have been its M&P Shield family of guns and the Bodyguard 380, which is described as delivering "personal protection in an easy-to-carry, comfortable platform."
Still on target for growth
What that means is that
Image source: Getty Images.
And civil unrest that's developing in the wake of the election is going to keep shining a light on personal safety, suggesting the gun boom isn't over yet. Moreover, in predicting that October's NICS numbers would surprise analysts last month, I also noted that when it comes to background-check numbers, November and December
Certainly, this year is going to blow away the results of 2015's record year, and there is every indication that the pace of gun buying will remain high so long as fears of crime, civil unrest, and terrorism are present. So how high can gun demand run after 18 straight record months? Time will tell, but I'd say a lot higher than where it is today, and I don't think this streak is anywhere near over yet.
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