Cabelas Inc (CAB), Olin Corporation (OLN): With Obama’s Gun Bill Defeated, Is the Bullet Bubble Dead?

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A president’s lament
So why just until last Wednesday?

Because that’s when, much to the chagrin of the president and his administration, the U.S. Senate shot down the vital background-checks amendment in a 54-46 vote, short of the required 60-vote threshold needed for it to proceed.

Curiously enough, the background-checks amendment was one of several introduced as a bipartisan compromise for conservatives, and it was largely viewed as having the greatest chance of passing the Senate.

While President Obama called it a “shameful day for Washington” and vowed to continue his gun-control efforts, the fact remains that, as it stands, the legislation appears to be dead in the water.

So what does this mean for businesses reliant on making and selling guns and ammunition? While they definitely won’t be going anywhere anytime soon, many investors seemed to have read the writing on the wall the day following the Senate vote: Shares of Olin Corporation (NYSE:OLN) fell by nearly 2%, Sturm, Ruger & Company (NYSE:RGR) fell 1.5%, and Cabelas Inc (NYSE:CAB) dropped by around 5% last Thursday alone.

A deflating bubble
Consider the words of Olin Corporation (NYSE:OLN) CEO Joseph Rupp, who, when asked whether increased legislation would have any negative effect on ammunition demand, compared the current surge with previous spikes in demand:

[T]hat surge will end and we’ll see a drop-off. I think last time we projected a drop-off in the 10% to 20% range over a two-year period. I think our thinking would be there would be something similar to that. The length of the surge, it’s hard to project. But certainly, I think our statement — I mean, getting it well into the third quarter is a pretty fair statement.

That “third quarter” statement, of course, is a reference to Olin Corporation (NYSE:OLN) management’s previously outlined expectations of current demand lasting well into the third quarter of 2013.

In then end, however, consider this your advance warning: Rupp — a man with much to gain and arguably the best seat in the house within the ammunition market — is unequivocally stating that this bubble will eventually burst.

The article With Obama’s Gun Bill Defeated, Is the Bullet Bubble Dead? originally appeared on Fool.com is written by Steve Symington.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of Sturm, Ruger.

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