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.