US gun maker shares rally ahead of vote

Shares of gun makers rose ahead of the US midterm elections, as investors tried to anticipate how gun control laws could change.

A salesman in a gun store in Virginia shows a bump stock installed on an AR-15 rifle. Pic: AFP

Shares of gun makers rallied ahead of the US midterm elections, as investors tried to anticipate how the future makeup of Congress will reshape gun control laws.

As voters headed to the polls, American Outdoor Brands closed up 4.7 per cent, Sturm, Ruger & Co. rose 3.7 per cent, and Vista Outdoor advanced 2.1 per cent.

Gun makers’ shares are heavily influenced by shifting political winds. The stocks have swung in the past after high-profile shootings.

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Shares of gun manufacturers jumped after the 2008 election when Democrats took control of Congress and Barack Obama won the presidency, as investors wagered that the events would lead to a crackdown on gun-ownership rights.

Holiday promotions and a “potential election-driven uptick” could push a proxy for gun sales -- Federal Bureau of Investigation background checks -- higher in the near-term, James Hardiman, a Wedbush Securities analyst, wrote. He predicts American Outdoor will rally about 20 per cent from its current price to $16.50 a share.

Representatives for American Outdoor, Vista Outdoor and Sturm, Ruger couldn’t immediately be reached for comment.

Recent polls indicate that Democrats are poised for a majority in the House, while Republicans will retain control of the Senate. A greater showing of Democrats in Congress could mean stricter gun control, analysts say.

These stocks are “definitely going to be volatile. They’re going to react” to polls and the results, said Ilya Feygin, New York-based managing director at WallachBeth Capital.

In addition to the congressional races, voters around the country will decide on a number of ballot measures related to the national debate on mass shootings. The state of Washington is considering an initiative that would introduce enhanced background checks and increase the minimum age to buy a semiautomatic rifle to 21.

On an earnings call last Thursday, an analyst asked how quickly Sturm, Ruger could ramp up production if Democrats take the House and gun control becomes a priority for Congress.

Chief executive Chris Killoy said that the company is familiar with which types of gun models would be most likely impacted by tighter regulation. He said the company has made sure it has inventory for the potential sales.

“If there were an uptick in demand....we would be ready to capitalise on it,” said Mr Killoy on the call.

Dow Jones Newswires