Enomoto: Gun Stocks Are Controversial and Risky, But Buy Smith & Wesson

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Dan Z. for TTAG

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Outside of the private-prison segment, few market sectors attract as much attention and controversy as self-defense stocks, particularly companies tethered to the firearms industry. With countless tragic gun-related crimes sparking across the nation over the years, tickers like SWBI, RGR, and POWW cannot avoid public anger. At the same time, gun and ammunition manufacturers do plenty of good, making for a complex but possibly bullish case.

Inherently, the issue of gun control consistently ranks near the top among the most politically significant discussions in the U.S. Quite frankly, gun violence is out of control in this country. In addition, too many of the victims are some of society’s youngest and most defenseless. …

However, firearm advocates also present a viable case for self-defense stocks. Fundamentally, gun ownership is integrated into the American DNA. Without firearms, the U.S. would not exist, likely remaining a British colony. As well, there are more guns than people in the U.S., implying strong sentiment for firearm ownership.

From a societal perspective, a rise in crimes in the post-pandemic new normal has negatively impacted both businesses and individuals. With varying response times for law enforcement agencies, sometimes, people must take matters into their own hands for self-preservation. Also, with public anger against law enforcement for police brutality incidents, fewer people want to become police officers.

Finally, the firearms industry also hires hundreds of thousands of Americans across the nation. Cracking down on the sector entirely would equate to careers destroyed, a matter that is also politically unpalatable. Therefore, contrarian investors may want to consider the below self-defense stocks. …

To be clear, self-defense stocks represent significant risks, in part because of their controversial nature. However, if one had to pick a winner, it might be SWBI. Fundamentally, the branding of Smith & Wesson and the notoriety that it evokes may draw curiosity. In a tight consumer market, a business needs all the advantages it can get.

— Joshua Enomoto in Self-defense or Death Promoting? Should You Invest in Gun Stocks?

 

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