Gunmaker Stocks Jump as Obama to Seek New Limits on Weapons

  • Smith & Wesson, Sturm Ruger buck decline in global markets
  • President may soon take `first of several steps,' analyst says

Smith & Wesson Holding Corp. and Sturm Ruger & Co., the two largest U.S. gunmakers, rose the most in three weeks after President Barack Obama said he will use his executive authority to introduce restrictions that are designed to curb gun violence.

“When the government attempts to tighten gun regulation, near-term sales of firearms tend to go up,” said Rommel Dionisio, an analyst at Wunderlich Securities Inc. who covers Smith & Wesson. “Consumers are fearful of a certain class of firearms being restricted or legislated against.”

Demand for firearms climbed in December on speculation about further gun control following the November attacks in Paris and after two gunmen on Dec. 2 killed 14 people in San Bernardino, California. Background checks by the Federal Bureau of Investigation, the best indicator for gun sales, jumped about 40 percent in December from a year earlier, Dionisio said.

Obama stirred concern over gun restrictions after saying Monday that he plans to unveil gun initiatives “over the next several days” that were recommended in a report from Attorney General Loretta Lynch and FBI director James Comey. The actions are designed to help prevent guns from being obtained by criminals and by those who are mentally unstable, Obama said. 

“The good news is that these are not only recommendations that are well within my legal authority and the executive branch but they’re also ones that the overwhelming majority of American people, including gun owners, support and believe in,” Obama said at the start of a meeting with Lynch and Comey.

Smith & Wesson rose 5.9 percent to $23.28 at the close in New York and Sturm Ruger gained 3 percent to $61.39. Both were the biggest one-day increase since Dec. 10. The Standard & Poor’s 500 Index dropped 1.5 percent Monday as stocks sank worldwide.

How long the gunmakers’ sales surge will continue depends on Obama’s actions, Dionisio said. The president is scheduled to appear Thursday at a town-hall event at George Mason University in Fairfax, Virginia, to discuss how to address gun violence. One move could be to require background checks for sales at gun shows, Dionisio said.

“That in and of itself is not that significant of an action, but the investment community believes that could be the first of several steps the administration might take,” he said.

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