Now that the threat of a ban on gun sales has subsided and stock prices of gun stocks are lower, is it the right time to invest in the gun stock market?
In this article:
Gun Company Stocks | Hitting Your Investment Portfolio
Guns and Stocks
The gun, firearm, and weapon industry is one of the toughest industries to invest in. The industry itself is exposed to public scrutiny, and it’s vulnerable to the tightening public policy against firearms.
Weapon manufacturers or gun-making companies own publicly traded gun stocks. The stocks are subject to fluctuations depending on the administration, negative news like mass shootings, and public opinion.
How to Invest in Gun Stocks
If you are keen on investing in the gun stock market, you should answer the following questions and considerations first:
- Do you want to invest in a company that sells purely firearms or not?
- Are you inclined to invest more in personal firearms or military arms?
- Do you want to invest in funds or individual stocks?
- Is there a threat of a gun ban?
People can make money with gun company stocks. To choose the best gun stocks to purchase, these tips can help.
Step 1. Know Your Options
Do you want to invest in a pure firearms company? Many gun-manufacturing corporations have diversified their products and included other items like sporting goods, weapons, electronics, chemicals, among others.
a. American Outdoor Brands (NASDAQ:AOBC)
One such example is American Outdoor Brands (NASDAQ:AOBC). The company changed its name from Smith & Wesson Holding Corporation to highlight its diversified product list.
It is focusing on growing other brands to achieve its “vision of being the leading provider of high-quality products for the shooting, hunting, and rugged outdoor enthusiast.”
Some of its products include electro-optics, gun cleaning supplies, tree saws, manufacturing, and other outdoor accessories.
b. Vista Outdoor Inc. (NYSE:VSTO.N)
Another diversified gun stock company is Vista Outdoor Inc. (NYSE:VSTO.N). It is a relatively new player in the market.
It is well-known for its Federal Premium and Savage Arms brands. The company has two main business segments:
- Shooting sports
- Outdoor products
The company’s shooting sports segment contributes to 50% of sales. The other 50% comes from outdoor products like golf products and accessories, telescopes, and other camping goods.
c. Sturm, Ruger & Co. (NYSE:RGR)
On the other hand, some companies focus on gun manufacturing, like Sturm, Ruger & Co. (NYSE:RGR). Sturm, Ruger & Co. maintains its product list closely related to weapons like knives and other gun-related accessories.
Should You Buy from a Pure Gun Company?
As a potential gun stock investor, you need to decide if you want to play on a pure gun company or not. Investing in a pure firearms company is more challenging than investing in a company with varying products.
If the gun market is down, this has a direct negative effect on your portfolio. In contrast, your portfolio may not easily plummet if you invest in a diversified gun company.
Aside from this, you also need to know whether the company caters to retail individuals or to armed forces.
Companies that serve retail consumers tend to have smaller operations compared to those that act as contractors to the military, which leaves more room for growth. This is an opportunity for an investor to grow their portfolio in exchange for a higher risk.
Defense contractors that produce weaponry, such as missile systems and attack aircraft, have dealings with armed forces and more stable operations compared to the former.
Step 2. Identify Different Funds And Plans That Have Gun Stocks
You might be surprised that a number of index funds and pension plans carry gun-related and weapon-related stocks in their investment portfolios.
A number of retirement plans are also into gun stocks as a passive income source. In fact, your IRA or 401(k) plans might have indirectly included gun stocks.
What is Passive Income? It refers to regular cash flow that needs less intervention, effort, or maintenance from the recipient or investor.
There are several websites that help identify funds that have gun stocks. You can also ask your own investor to check whether your portfolio already includes them.
Aside from buying gun stocks indirectly, you can also buy individual gun stocks such as American Outdoor Brands, Sturm, Ruger & Co., and Vista Outdoors Inc.
Step 3. Keep a Close Eye on the Market Conditions
Gun stocks are peculiar — in times of administration threats of constricting gun policies, people are more prone to stock up on guns. Hence, sales will increase, which will positively affect stock prices.
Without the urgency to buy guns, sales will go down along with the stock price. During the Obama administration, there were constant threats of a gun ban and policy tightening, driving gun stocks to stable upward growth.
If you want to enjoy passive income and build your IRA through gun stocks, you have to consider the current market conditions and the political situation.
Step 4. Invest Appropriately And Wisely
Gun stocks, like the business itself, can be complex. You have to assess yourself whether you want to play as a conservative investor or an aggressive one.
After your self-evaluation, you can start investing appropriately based on your investment appetite:
|Where to Place Your Money||Conservative Investor||Aggressive Investor|
|Pure Gun Company||ETFs||Individual stocks|
|Diversified Gun Company||Mutual funds, index funds||Individual stocks|
If you are more aggressive, buying individual gun stocks is an option. Then, you can choose more specifically if you want to buy an individual stock of pure gun companies, like Sturm, Ruger & Co. or a more diversified gun company like American Outdoor Brands.
On the other hand, if you are on the conservative side and want to buy gun stocks, there are mutual, pension, and index funds available that invest in gun companies.
However, if you want to buy index funds focused on gun stocks, there are unfortunately no available ETFs for that. There are only funds that invest in gun companies on top of other companies.
You can invest by yourself or get help from institutional investors. These are organizations that invest your money in gun company stocks on your behalf.
Note that with the nature of gun company stocks, not all institutional investors may be investing in these in the stock market. You can inquire from the company if they do as it’s also your right to know.
Defining the Terms
Your chances of success also increase when you become familiar with the different investment terms. IYIRA has discussed some of them extensively, but you can refer to the list for an overview:
- Exchange-Traded Funds – Also known as ETFs, this is a set of securities that involves tracking an index. It is similar to stocks, but the primary difference is you refer to an index than an individual publicly-traded company.
- Mutual Fund – It is a kind of institutional investor wherein an organization manages the pooled resources of investors. The company then decides what stocks to invest in.
- Small-Cap Stocks – These are stocks with a small market capitalization between $250 million and $2 billion. Usually, mutual funds with small-cap stocks have investments in gun manufacturer stocks.
Actively managed funds, meanwhile, are less likely to invest in gun company stocks. This is because an asset manager can carefully pick stocks.
Step 5. Work with a Financial Planner
Just because you’re investing small amounts for gun company stocks doesn’t mean you don’t need the help of a financial planner.
The more assets you have, the more you require their services.
A financial planner can do more than tell you where to put your money:
- They can act as analysts. They can keep track of the market conditions and assist you in limiting your exposure to losses.
- Financial planners can work according to your financial goals and strategy. Are you building free cash flow, capital, or retirement funds?
- They can tell you when it’s time to divest. A divestment campaign is one of the ways to limit your chances of losing a lot when gun company stock prices go down.
Step 6. Be One Step Ahead with the News
Policies and regulations can certainly affect your choices for the best gun stocks to buy. So does other types of news, however.
For example, mass shootings can increase the demand for background checks and highlight the decrease of socially responsible owners.
This may eventually lead to stricter gun control and law enforcement policies, as well as higher prices of guns in retailers. All these can bring down the shares of gun company stocks.
Tariffs on the raw materials used in the production of guns can also impact your investment. They usually result in a drop in the value of the shares.
A drop in market shares isn’t necessarily a bad thing. It may even be one of the best times to buy as they will likely go up again later.
These types of news only suggest that, to keep yourself abreast of factors that can affect market conditions, go beyond the Wall Street section and National Rifle Association blogs. Read other types of news as well.
Admittedly, investing in gun stocks is not for everyone. People who are supporters of a gun ban may tend to shy away from funds that have gun stocks in their portfolios.
There are those who also support buying gun stocks to make a difference in the gun industry. Others see gun stocks as a profitable way to build up investments.
Whichever type you are, it is an undeniable fact that gun stocks, with all the pros and cons, have a lot of growth potential in the market.
Do you know other ways to invest in gun company stocks? Tell us in the comments section below.
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Editor’s Note: This post was originally published on November 2, 2018, and has been updated for quality and relevancy.