Many investors want to know if their retirement accounts can invest in gun manufacturers. Knowing which fund invests in a firearms manufacturer will help them make more calculated decisions.
In this article:
- An Important Disclaimer About Investments in US Gun Manufacturers
- List of US Gun Stocks That Mutual Funds Likely Invest in
- Relationship Between Firearms and the Economy
- The Legal and Financial Complexities for Firearms Manufacturers and IRAs
- What’s the Future for American Gun Manufacturers?
Funds and Investments in US Gun Manufacturers
An Important Disclaimer About Investments in US Gun Manufacturers
Before someone learns about investing in gun manufacturers, here’s a disclaimer regarding perspective on the gun industry. This article in no way recommends investors to invest or avoid mutual funds or companies that invest in gun manufacturers.
Please take this content rather as a source of data where investors can formulate investment strategies.
Some investors may feel that investing in gun manufacturers is not socially responsible. Other investors argue that sporting goods companies and other specialized companies offer great economic benefits and may also be necessary for hunting and sport.
There is an easy way to find out if a mutual fund invests in gun manufacturers.
Weapon Free Funds can directly show whether or not a mutual fund has an investment in companies that manufacture weapons. All you need to do is enter the name of the mutual fund, and the nonprofit website searches the database for any kind of investment in the gun sector.
Shareholders of the nonprofit As You Sow operate the website and track the portfolios of prominent funds.
A lot of big funds actually have investments in the gun industry.
For instance, Vanguard Total Stock Market ETF (VTI) and Vanguard Small Cap ETF (VB) have holdings with Sturm, Ruger & Co., a company who has massive operations in the commercial gun industry with the manufacture and sales of pistols, handguns, and other weapons and ammunition for sports, self-defense, and hobby.
Another way for investors to find out if they invest in gun manufacturers is to check the holdings of their mutual funds. If the fund has shares of Smith & Wesson (AOBC), Sturm, Ruger & Co. (RGR), and Remington Outdoor Company (ROC), then the fund has exposure to the gun industry.
List of US Gun Stocks That Mutual Funds Likely Invest In
- Smith & Wesson (AOBC) is headquartered in Springfield, Massachusetts, and is a well-known manufacturer of guns and ammunition. The company is the largest producer of revolvers and pistols in the United States.
- Sturm, Ruger & Co. (RGR) is the largest American gun manufacturer. Its corporate headquarters is in Southport, Connecticut.
- Remington Outdoor Company (ROC) is an American holdings company with substantial positions in well-known brands like Bushmaster and Remington. The company is the largest rifle maker in the United States.
Relationship Between Firearms and the Economy
The gun industry is big business, whether as a part of the self-defense industry or as a member of sporting goods companies.
As of 2018, around 43% of all US households own one or more firearms. That number shows cause for a market with a healthy demand for gun sales.
Furthermore, that demand translates into 300,000 direct jobs through employment by gun manufacturers, according to the National Shooting Sports Foundation (NSSF). These workers earn approximately $15 billion in wages.
Direct and indirect economic activities with firearms have reached $51 billion. This number includes retail, logistics, and other economic activities from the sales of firearms.
The Demand Stays Strong
The market for firearms is still growing, even with the reports of violence and mass shootings. Sales of guns and weapons reached approximately $16.8 billion, according to the 2018 IBIS World Report.
Due to the huge market value for the gun industry, lobbying for and against the firearms and weapons sector requires a well-oiled political machine.
The biggest lobbying entity is the National Rifle Association (NRA). A 2016 financial statement and report for the National Rifle Association stated that the entity spent $419 million in 2016 on the presidential campaign, lobbying activities, and pro-gun advertisements.
On the other side of the spectrum comes lobbying against gun manufacturers.
According to Mother Jones, a nonprofit organization, gun violence costs $229 billion every year. This massive expense is the aggregate amount from both direct costs, such as medical fees, and indirect effects, such as lost wages.
Institutional investors care not only about profit margins but also corporate responsibility and reputation. Due to massive public outcry caused by mass shootings, both private investment funds and government pensions think twice before buying more shares of a business involved in the manufacture and sales of guns and ammunition.
For example, legislators for the state of New Jersey want to limit or even totally dispose of all the gun stocks in the state’s public pension. These state and federal policies can also influence the corporate world to minimize interactions with the gun industry.
The New Jersey Pension Fund has a total value of $78.2 billion as of fiscal year ending June 30, 2018. With lawmakers limiting the access of gun manufacturers to billions of dollars, the gun manufacturers have fewer sources of capital as well as decreased financial support.
The Legal and Financial Complexities for Firearms Manufacturers and IRAs
One of the most gruesome school shootings in recent history occurred in 2012. The elementary school shooting happened in Newtown, Connecticut, where killer Adam Lanza shot and killed 26 people, including 20 schoolchildren ages 6 to 7 at Sandy Hook Elementary School.
The 20-year old killer, who killed his mother first and then committed suicide after the elementary school mass shooting, had access to the family guns.
The unfortunate event sparked renewed discourse regarding gun control. In the financial world, nine families of the 26 victims filed a lawsuit against Bushmaster, Remington Arms, and other companies, the gun manufacturers of the weapons used by the killer.
These weapons, as per the families, are suitable only for the military — not civilian — use, which the companies marketed the gun for. While the court has ruled that the company is not liable, the families are currently appealing the decision.
Of course, there are other mass shootings that have scarred the societal psyche. While the Constitution espouses the right to arms, some protestors are pushing firearms companies to responsibly distribute military-class guns only to their intended market and to make these weapons inaccessible to non-military personnel.
Limiting the Access
Most people think that these mass shootings don’t necessarily affect the financial side of the gun industry. However, some retail giants and payment processors have limited or even eliminated any interaction with the gun industry.
For example, payment processor titan PayPal does not allow the purchase and sales of firearms using their platform. For PayPal and other processors like Apple Pay and Stripe, alienating the gun industry makes sense.
This move not only shows corporate responsibility but also minimizes the administrative costs of transporting weapons.
Another prominent example is with the retail industry, specifically the general merchandise sector. Amazon has limited the marketing, purchase, and sales of firearms and ammunition.
These moves by financial giants affect not only the bottom line of the gun industry. Eliminating and limiting interactions with the companies also affects how investors look at such companies.
If market leaders avoid such entities, the market usually follows, which can mean lesser capital injected to gun manufacturers.
What’s the Future for American Gun Manufacturers?
Many things are already affecting even the best gun manufacturers in the United States. Here are some of the factors affecting the U.S. gun industry.
So far, most of the largest gun manufacturers in the world are in the United States. The U.S. is still the number one retailer and exporter for a variety of gun brands (including outdoor brands) and types including a shotgun.
This doesn’t mean, however, that there isn’t any competition. In the manufacturing sector, the United States has to battle it out with other large countries such as Russia and China.
China, for example, became one of the top five arms suppliers in the world from 2008 to 2017. This was partly due to the significant budget the country set aside for defense.
2. Violence Pertaining to Guns
Gun violence is currently one of the pressing human rights issues in the world, according to Amnesty International. The organization revealed the crime is responsible for more than 40% of homicides globally.
From 2012 to 2016, more than 1 million people died due to firearms, while no fewer than 500 are killed by it on a daily basis.
In countries such as Yemen and Syria, gun violence is one of the leading causes of a massacre. It also worsens the effects of war in these areas.
As gun violence continues in the United States and elsewhere, safety becomes a primary concern, and that can impact rules and regulations on the sale, distribution, and ownership of these weapons.
Court documents and the presence of activists on the streets will tell you the reputational damage of gun violence on community perception.
On the other side of the coin, however, it seems gun rights gained traction. The NRA reported a record-high number of members at 5.5 million. The spike occurred after the deadly Florida shooting.
The same trend also happened during the mass shooting at Sandy Hook. Experts suggested the increase might be due to the people’s perceived threat to their Second Amendment.
The influence of the NRA is also spreading in other countries such as Brazil. Its president, Jair Bolsanaro, echoes the same sentiments of the NRA. In fact, the country already eased its policies on gun importation and limits of ammunition.
If investing in gun manufacturers is what’s on your mind, then it’s safe to assume these companies can find new markets in case of policies tighten in the United States.
As more people call on tighter gun controls, states are taking action, partly perhaps as an effort to avoid being accused of negligence.
In California, for example, those who wish to buy ammunition from July 1 may have to go through a background check, which the customers have to pay.
Retailers, meanwhile, also have the responsibility to make sure their buyers are not on the DOJ list that contains the names of people prohibited from buying guns.
Washington also classified that a semi-auto sporting rifle, such as a Remington 10/22, is a semi-automatic assault rifle. This means that a person who wants to buy it, even it’s for hobby or hunting, should undergo training and background check.
What is an assault rifle? This is a military rifle with a detachable magazine and is capable of rapid fire.
The training, which covers suicide prevention and safe handling, will be under the care of law enforcement agencies, colleges or universities, or organizations that can perform such training.
As a future shareholder, these policies can bring down the value of gun manufacturers in the country unless these companies can learn to adapt and innovate.
Is the economic activity worth the side effects? Will the price growth of these gun stocks slow down when the public sees them as controversial? How powerful is public perception compared to a strong sales and earnings record for investors?
Any responsible investor takes all of these questions into account before making the jump. Whether or not you want gun manufacturers in your IRA, no one can deny the economic weight of the industry.
What are your thoughts about investing in gun manufacturers? Let us discuss in the comments section below.
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Editor’s Note: This post was originally published on January 1, 2019, and has been updated for quality and relevancy.