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Smith & Wesson, Gunmakers Rally After Obama Re-Elected

Smith & Wesson Leads Gunmaker Rally as Obama Seen Buoying Sales
Smith & Wesson Holding Corp. climbed the most in two months to lead a rally among firearms manufacturers as traders speculated that President Barack Obama’s re-election will spur gun sales. Photographer: JB Reed/Bloomberg

Smith & Wesson Holding Corp. climbed the most in two months to lead a rally among firearms manufacturers as traders speculated that President Barack Obama’s re-election will spur gun sales.

Shares of Smith & Wesson jumped 9.6 percent to $10.37 at the close in New York, the biggest gain since Sept. 7, while Sturm Ruger & Co. rose 6.8 percent to $47.68. Both make handguns as well as rifles that include semiautomatic models.

After sidestepping gun-control measures in his first term, Obama said last month he would consider reintroducing a ban on civilian purchases of military-style assault weapons. Firearm sales have grown at 10 percent annually since 2008, when Obama was elected, compared with a 7 percent rate from 2001 to 2007, according to Benchmark Co.

“While we maintain our view that these political sales do not represent the entirety of recent firearms sales growth, we expect that with President Obama’s re-election these sales could continue well into his second term,” Mike Greene, an analyst at New York-based Benchmark, wrote in a note to clients today.

Smith & Wesson, based in Springfield, Massachusetts, more than doubled this year through yesterday, while Sturm Ruger gained 35 percent. That compared with an 11 percent gain for the Russell 2000 index. Greene has buy ratings on both stocks.

Stocks Upgraded

James Barrett, an analyst at CL King & Associates, raised his rating on Smith & Wesson to buy and Southport, Connecticut-based Sturm Ruger to strong buy in separate notes to clients today. He had previously had neutral ratings on both companies.

“President Obama’s re-election will be very positive for gun sales in the coming months,” wrote Barrett, who is based in New York.

Firearm purchases surged 27 percent in 2009, the year after Obama was first elected president, Benchmark’s Greene said in his note. They slumped 16 percent the following year, disrupting plans by Cerberus Capital Management LP’s Freedom Group Inc. to sell shares in an initial public offering.

Freedom’s brands include Bushmaster, Remington and Marlin, as well as ammunition maker Barnes Bullets.

Obama broached the idea of trying to revive the assault-weapons ban, which lapsed in 2004, during his Oct. 16 debate with Republican presidential nominee Mitt Romney. His comment followed criticism from gun-control advocates who said he has done too little to restrict access to firearms.

The Brady Campaign to Prevent Gun Violence gave him its lowest grade of F after his first year in office for “failed leadership” on the issue. Except for a law aimed at improving state reporting for federal background checks, there have been no major U.S. gun regulations since the assault-weapons ban was put in place in 1994.

“We do not believe there would be support in Congress for more restrictive firearms legislation,” Greene wrote.

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