Which is a Better Investment – a Gun or the Stock of a Gun Manufacturer?
I know there are a lot of people right now saying “neither.” But being an investment examiner, I want to look at the potential for making money.
Whenever there is a horrible mass killing accomplished with a firearm, there are always the inevitable knee-jerk reactions by every grand standing politician. All that does is increase gun sales.
When Barack Obama was elected president for his first term back in 2008, there was an instant run on guns and ammunition. Gun stores were sold out, and you could not find ammunition.
After Gabrielle Giffords was shot by the smiling lunatic, Jared Loughner, gun stores could not keep high capacity magazines in stock.
After the Colorado theatre shooting, once again there was a run on semi-automatic rifles, and now after the tragedy in Connecticut, many politicians are once again touting restricting gun ownership – increasing gun sales dramatically.
So, looking at the situation without any agendas or ulterior motives, but rather strictly looking at the investment aspect, which has the potential for making more money, the stock of a gun manufacturer or the actual gun?
There are only a couple of gun manufacturers that trade publically on the stock market – Ruger (RGR) and Smith & Wesson (SWHC).
In the case of Sturm Ruger & Co., at the beginning of the year, the stock was trading around $33 per share. As of this article, the share price is around $43 – an increase of $10 per share for the year. Let’s assume we purchased 100 shares at the beginning of the year for a total outlay of $3300. Not counting dividends paid during the year, if we sold now we would get $4300, or a profit of $1000 for the year – not bad.
With Smith & Wesson, the stock was trading at around $4.49 and is currently around $7.96, or a gain of $3.47 per share. So if we had purchased 100 shares in January, 2012, we would have had to shell out $449, and if we cashed in now, we would see about $796 for a gain of $347 – again – not bad.
Ruger makes the SR 556 assault-style rifle, and at the beginning of the year the gun could be purchased for around $2000. It is currently selling for around $2700.
Smith & Wesson also makes the assault-style rifle that is so hated right now. At the beginning of the year, that gun sold for about $650. Today that gun is selling for around $2200 – an increase of $1550.
So let’s try to even this thing out. Assume we had invested $650 back in January – here are our results:
$650 invested in SWHC – Smith & Wesson Holding Company – we would own 144 shares. In December we sell our 144 shares for $7.96 per share – $1146. A profit of $496.
$650 invested in RGR – Sturm, Ruger & Co. – at $33 per share, our $650 buys us 19 shares. We now sell our 19 shares for $817. A profit of $167.
We bought a Smith & Wesson AR 15 rifle for $650 back in January – we now sell it for $2200. A profit of $1550.
We bought a Ruger SR 556 rifle for $2000 and we now sell it for $2700. A profit of $700.
In this example it looks like that evil old Smith & Wesson would have us rubbing our dirty little money grubbing hands together.
Mind you – I am not taking any pro-gun or anti-gun stance here. I am not arguing for gun control, nor am I screaming about 2nd amendment rights. I also do not buy and sell guns for a living, nor do I intend to – I am, however, always looking for ways to make money.
Does this make me a capitalist pig? Absolutely.