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Will Horrific Mass Shootings Ever Impact Gun Stocks?

Josh Enomoto

Disturbingly, mass shootings are becoming all too common, perhaps leading to an overall callousness to the tragic circumstances. However, the latest gun-violence related incident at First Baptist Church in Sutherland Springs, Texas, shook even the most hardened observer. Due to the unimaginably horrific and evil act, concerned Americans are calling for tighter gun control measures. Is this finally the time when gun stocks will be negatively impacted?

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For now, long-term investors of gun stocks are holding steady because of President Donald Trump’s administration.

Trump proudly boasts of his endorsement from the National Rifle Association, and his sons are avid hunters. Furthermore, the Commander-in-Chief also offers logical counterarguments.

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The Sutherland Springs tragedy provided a perfect example. When the media pressed about potential gun control measures, the President responded that hundreds more would be dead without the intervention of an armed good Samaritan.

Coincidentally, most gun stocks have not reacted that poorly to the horrific violence. Sturm Ruger & Company Inc (NYSE:RGR) is virtually at parity since the incident, while American Outdoor Brands Corp (NASDAQ:AOBC) is only down less than 2%. The exception is Vista Outdoor Inc (NYSE:VSTO); however, because they mostly concentrate on ammunition production, the comparison isn’t quite apples-to-apples.

In my opinion, President Trump is 100% correct in his assessment. At the same time, no one can deny the outrage. Calls concerning how many more innocent people having to die ring emotionally potent.

With so much pressure on the Trump administration, and on Republicans in general, will mass shootings finally impact gun stocks? Or, will we continue on the path of more of the same?

Gun Stocks are Under Scrutiny

From a purely investment point-of-view, it’s hard not to be a little concerned about the latest developments. Arguably, prior mass shootings at least had a reason for occurring, no matter how demented. For example, high-school bullying sparked the Columbine massacre. Again, that’s no justification, but at least we can identify the source of the hatred.

But what about the Las Vegas attack? Despite more than a month having passed, we have very little knowledge of why the cowardly murderer did what he did. And presently, this senseless tragedy that happened over the weekend also simply baffles the mind.

To me, it’s obvious that the degradation of moral principles and traditional family values contributes greatly to the violence. However, most people are looking for tangible scapegoats, and that’s bad news for gun stocks. The reason is two-fold. First, the ever-popular AR15 semiautomatic rifle has been at the epicenter of recent mass shootings, according to USA Today. Second, both Ruger and Smith & Wesson (under the American Outdoor umbrella) are major manufacturers of AR15s.



If AR15s are banned, RGR and AOBC face an imminent correction.

This wouldn’t be the first time that the AR15 is in broader society’s crosshairs. Several mass shootings occurred during President Barack Obama’s administration, yet the Democrats failed to push new gun control measures. With a Republican in the White House, gun control seems even more unlikely.

However, I can’t recall a time when we suffered back-to-back mass shootings with high, double-digit fatalities. Americans love their guns, but  love justice and security as well. In addition, the recent Virginia gubernatorial race confirms the real threat of aligning too closely with an unpopular president.

Gun-Control Proponents May Be Wasting Their Time

So will the latest spurt in mass shootings finally put an end to the AR15 rifle? Well, RGR and AOBC shareholders can rejoice. No way in all heck does our government ban AR15s.

Due to the inherent structure of this rifle platform, specific bans will be ineffective. Most outsiders don’t realize that legally, the actual “gun” for the AR15 is the lower receiver, or the physical housing of the trigger assembly.

Firearm-law granularity allows me to walk into any gun show in the country, purchase an AR15 upper assembly (essentially the barrel of the firearm), and walk out with it happy as a clam: no registration, no wait period, no questions. Because a barrel of a gun is not actually a gun, no law enforcement agency can stop me.

For AR15-specific gun control to work, lawmakers would have to ban the lower receiver. But an AR lower is just fabricated metal. The scope is simply too broad for banning.

Moreover, eliminating the AR15 wouldn’t eliminate semiautomatic rifles. RGR manufacturers the Mini-14 rifle, which fires the same .223 Remington or 5.56 NATO round that the AR15 fires. Nobody’s calling for the Mini-14 to be banned, yet it renders the exact same damage a civilian AR15 renders.

As I said, the AR15 is a convenient scapegoat. Luckily, for owners of gun stocks like RGR and AOBC, the platform is virtually impervious to illegalization. Plus, if a liberal administration failed at imposing gun control, good luck convincing “The Donald.”

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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