Gun Stocks: A Look Back And Ahead

Gun stocks are not immune to the broader market meltdown driven by geopolitical and macroeconomic developments. And the sector has more reasons to fret beyond broader marketwide factors.

Point-Blank Statistics

Gun deaths are on the rise in the U.S., with the latest statistics from the Centers for Disease Control and Prevention putting the number at 39,773 in 2017, a 2.9-percent increase from 2016 and a 20-year high.

Source: Statista.

The U.S. had 12 age-adjusted gun deaths per 100,000 people in 2017, up from 11.8 in 2016 and marking the highest rate since 1996. About six countries in the Americas accounted for over half of all firearm deaths in 2016, according to JAMA, a peer-reviewed medical journal. About 32 percent deaths occurred in Brazil and the U.S., with Brazil accounting for 25 percent of all firearm homicides and the U.S. accounting for 35 percent of all suicides.

In 2016, 6 countries in the Americas accounted for 50.5% of all deaths. An estimated 32% of deaths occurred in 2 countries. Brazil accounted for 25% of all firearm homicides and the US accounted for 35% of all suicides https://t.co/55lsdhZuLD pic.twitter.com/80UISzqEWU

— JAMA (@JAMA_current) August 29, 2018

Over 320 mass shootings occurred in the U.S. in 2018, according to the Gun Violence Archive. The deadliest was the Feb. 14 Stoneman Douglas High School shooting in Parkland, Florida that left 17 dead and 17 others injured. The Trump administration has banned bump stocks, an accessory that makes semi-automatic weapons fire faster. A bump stock was used by the shooter in a 2017 Las Vegas mass shooting that killed 58 people.

Related Links: Wedbush On American Outdoor Brands: Turnaround On Track

Laxer Rules To Blame?

The federal gun law in the U.S., which sets minimum standards for firearm regulation, bestows on every adult citizen the right to own a gun. Exceptions include convicted criminals, those afflicted with mental illness and non-citizens.

Licensed gun sellers are given the responsibility of doing background checks on buyers. Each state has its own set of laws aside from federal regulations with respect to what kind of weapons can be owned or carried in public.

How Gun Stocks Fared In 2018

Gun manufacturers and retailers fared as followed through Dec. 24 this year:

• Sportsman's Warehouse Holdings Inc SPWH: down 37.7 percent.
• Vista Outdoor Inc VSTO: down 30.5 percent.
• Sturm Ruger & Company Inc RGR: down 7.7 percent.
• American Outdoor Brands Corp AOBC: down 4.4 percent.
• Dicks Sporting Goods Inc DKS: up 6.3 percent.

Remington Outdoor, the oldest of gun makers, filed for Chapter 11 bankruptcy protection in March amid a tough firearms climate that left it with sagging sales and a heavy debt burden. It has since emerged from bankruptcy court, with the ownership transitioning from Cerebrus Capital Management to creditors that include JPMorgan Chase & Co. JPM's asset management unit.

Notwithstanding pressure from activists for liquidating holdings in firearm manufacturers and retailers, Wall Street firms are still invested in them. BlackRock, Inc. BLK and Vanguard are among the top shareholders in Vista Outdoor, Sturm Ruger & Company and American Outdoor Brands, CNBC reported.

The number of firearm background checks performed in November stands at 2,393,043, making it the second-highest November on record, according to the National Instant Criminal Background Check System.

Apart from a potential inflection in sales, the extended period of weakness in gun stocks could bring in bargain hunters. The fact that Wall Street firms have rallied behind these stocks could point toward a light at the end of the tunnel for firearms investors.