The Stat Pack
It has not escaped our attention that the Obama era was a boon for gun manufacturers. News stories throughout his Presidency chronicled the record pace of gun sales, especially in the wake of elections and pushes for stronger gun control measures. Fears of massive gun confiscations and restrictions during the Obama administration pushed firearm and ammunition sales to new heights, with the demand surges causing stores to run out of inventory and prices rising in response (click the graph to enlarge):
But now, that has all been replaced by confidence that the Trump administration will boost law enforcement and fight to preserve and expand access to guns. Ironically, it looks like the election of the NRA’s champion is leading to a decline on stock prices for arms manufacturers. The following chart is pretty telling.
President Obama Was Gun Manufacturers’ Best Friend
Source: HighTower Advisors based on Bloomberg data
Note: AOBC = American Outdoor Brands Corp., RGR = Sturm Ruger & Company Inc.
During George W. Bush’s eight years as president, starting with his election (11/7/2000) and ending 11/4/2008, the stock prices of two publicly traded U.S. arms manufacturers changed significantly. Specifically, they fell by 21% for Ruger (RGR) (from $8.94 to $7.04), while rising by 470% ($.50 to $2.85) for American Outdoor Brands (AOBC, formerly Smith & Wesson). Why the gain-loss difference between the two firms you might ask?
According to our Stat Pack and Fact Pack partner, Mike PeQueen, there are a variety of factors in play when discussing stock prices other than who is POTUS. For example, one company might have introduced more popular products during that period and, as a result, saw its sales rise. It’s also possible that one company expanded its distribution system, which also could have increased sales. Finally, one company might have had a different level of debt and higher/lower interest rates, which would have had a bigger impact on its bottom line compared to the other. You get the drift. All this said, as the chart shows, there does seem to be a correlation during the Obama years and the turnover of Congress, and, very clearly, the day after Trump was elected.
You might think all those possibilities wash out our hypothesis, but consider this: between Obama’s election on November 8, 2008 and Trump’s on November 8, 2016, RGR’s stock price increased from $7.04 a share to $64.40, or by a whopping 815 percent! In the case of AOBC, its stock price jumped by an even more massive 898 percent from $2.85 a share to $28.45.
Since the 2016 election, the stock prices of the two companies haven’t done quite so well. RGR’s price fell by 23 percent to $49.50 between November 8, 2016 and March 8, 2017, and AOBC saw a 32 percent drop to $19.21 during the same period. On an annualized basis, these declines hypothetically equal a 69 percent loss for RGR and 96% for AOBC.
The upshot? This is one of the few instances we can think of where it’s actually in the economic interests of a company to have their political adversaries in power.
We’ll monitor these stock prices and sales figures moving forward. It will be particularly interesting to see if this all leads to layoffs in the industry’s manufacturing and retail sectors, turning the new President, at least in one area, into a job-killer. In the meantime, that assault rifle you’ve been eyeing may finally come within your budget.
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This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of Hightower Advisors, LLC, or any of its affiliates.