Assault Weapons Sales Cool

Assault Weapons Sales Cool

CNN/Money reports today that the rush in assault weapons sales last year has tapered, along with the with the threat of a ban on the type of gun used in the Aurora, Colorado movie theater and Sandy Hook Elementary School shootings.

Many rifle manufacturers ramped up production last year in response to the sales spike, said Rommel Dionisio, industry analyst for Wedbush Securities. But demand has since stagnated, he said, and there’s now a glut of gun inventory,

“I believe what happened is that everybody who wanted to buy one did,” said Fernwood Firearms’ John Kielbasa. “Now it’s a buyer’s market.”

An inventory glut, combined with a decrease in sales (estimated by background checks performed by licensed firearms dealers) could spell decline for the industry, and those holding shares in the publicly traded companies.

Yesterday, we shared that a research firm had downgraded shares of Olin. Check your investments for these companies: Sturm Ruger (RGR), Smith & Wesson (SWHC), and Olin (OLN).

Divestment is a way to pressure the industry that obstructs common sense gun reform like the assault weapons ban and expanded background checks. It worked for South African anti-apartheid activists and it can work for gun violence prevention, too.

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Ammo Maker Olin’s Stock Downgraded

The market forces are combining to spell doom for investments in gun makers. Just yesterday, research firm Monness Crespi & Hardt downgraded their outlook on ammunition maker Olin (OLN). Last year MN&C upgraded Olin to a “buy” rating and has now reversed course to give Olin a “neutral” rating.

The Motley Fool takes note and ventures a guess why Olin was downgraded:

Olin’s “fatal” flaw is that analysts expect both earnings and cash flow to evaporate in short order, as guns sales wane.

TMF also correctly notes that FBI background checks, a general sign of gun sales, are down this year and that share prices for assault weapon manufacturer Sturm Ruger (RGR) are also down significantly this year, especially since missing earnings in February.

All in all, here’s an objective, market-based reason for dumping your gun industry stocks. They’re just not going to serve your portfolio well.