We recently compiled a list of the 9 Best Gun Stocks to Buy Now. In this article, we are going to take a look at where Dick’s Sporting Goods, Inc. (NYSE:DKS) stands against the other gun stocks.
Gun Culture in the United States
Civilians can own guns in over 175 countries of the world, albeit with laws and regulations restricting certain firearms. Ten of these countries had enshrined the right to own and bear arms in their constitution at some point in their history. Four still do – the United States, Mexico, Haiti, and Guatemala.
The most notable of these four is the United States. The country has the highest gun ownership in the world, with an estimated 393 million firearms owned by civilians, which translates to 120.5 guns per 100 people in the country, as we mentioned in the article 25 Countries with Highest Gun Ownership in 2024. The number of firearms in the United States outnumbers the country’s overall population. Moreover, despite Americans representing only 5% of the world’s population, the country is home to 40% of the world’s civilian-owned firearms.
The nation has a deep connection to guns, dating back to its earliest days. While there is mixed opinion over the right to own a gun and the laws that regulate its use in modern times, most gun owners consider the weapon an integral part of their freedom. The demand for weapons continues to remain on the higher side, which has given rise to a thriving firearms industry that employs thousands of Americans and generates billions of dollars in tax revenue for the government every year.
Gun and Ammunition Industry
America’s gun market is a significant contributor to the country’s economy. In 2023, the sector was responsible for over $90 billion of all economic output in the United States, according to The Firearm Trade Industry Association. This figure was 12% higher compared to 2022 when the economic activity from guns was valued at $80.7 billion. The industry in recent years has witnessed extraordinary growth, as more Americans choose to exercise their right to own guns, with 4.3 million citizens becoming new gun owners last year alone.
The report further mentioned that the market has created hundreds of thousands of jobs in the United States, directly in the guns and ammunition industry and indirectly in the ancillary and supplier industries. As of last year, 384,437 jobs in the country were tied to the sector, earning nearly $26 billion in combined wages. As a result, companies in the industry and their employees pay over $10 billion in taxes each year to federal and state governments.
Gun sales are soaring in 2024 as well. According to the FBI, an estimated 5.5 million new guns were bought during the first four months of the year. California, Florida, and Texas contributed 22% of all guns purchased during this period. SafeHome.org, a security and safety website, believes the upcoming 2024 presidential election in the US is a factor driving up gun sales in the country with varying opinions on strict gun laws among candidates running for the White House.
Gun stocks surged in July this year after the assassination attempt on presidential candidate, Donald Trump, which increased expectations of his victory. Trump has vowed to protect gun rights and oppose any firearm limits if he is elected this November. The assassination attempt was not the first instance of gun stocks spiking after a security crisis, mass shooting, or civil unrest. The demand for guns and ammunition has seen an uptick every time there has been a law and order incident or a fear that their availability will be limited through strict gun laws.
Methodology
We scanned Insider Monkey’s database of 912 hedge funds for the second quarter of 2024 to identify gun and ammunition manufacturing companies. From that list, we picked 9 gun companies with the highest number of hedge funds having stakes in them. The best gun stocks to buy now are ranked in ascending order of hedge fund holders in each company. In the case where two or more stocks were tied on the number of hedge fund holders, we outranked one over the other on market capitalization.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer in a specialty concept store wearing a full outfit of apparels and sports gear.
Dick’s Sporting Goods, Inc. (NYSE:DKS)
Number of Hedge Fund Holders: 34
Dick’s Sporting Goods, Inc. (NYSE:DKS) is a Fortune 500 company and the largest sporting goods retailer in the United States, with more than 800 stores across the nation, as of last year. It originally started in 1948 as a fishing gear shop in Binghamton, New York, before venturing into sporting equipment, hunting gear, apparel, and footwear. The company has four subsidiaries – Golf Galaxy, Public Lands, House of Sport, and Going Going Gone.
Dick’s Sporting Goods, Inc. (NYSE:DKS) has been moving away from guns and the hunting department for the last few years. After the 2018 high school shooting in Parkland, Florida, the management decided to stop selling high-capacity magazines and assault rifles like the ones used in the tragic incident. It also announced to set a minimum age of 21 for all gun sales. Over the next two years, Dick’s Sporting Goods, Inc. (NYSE:DKS) removed the hunting department from over 500 stores citing ‘underperformance’.
This year, during the second quarter, the company smashed analysts’ expectations, reporting EPS of $4.37 against anticipation of $3.87. Sales during the quarter totaled just under $3.5 billion, growing 7.8% compared to the second quarter in 2023. Gross profit for the quarter was at $1.28 billion, representing 36.7% of net sales. These strong results in Q2 were driven by growth in all categories, led by footwear and athletic apparel. The company saw more athletes purchase from their stores and digitally, and spend more than they did last year. At the heart of this success was Dick’s Sporting Goods, Inc. (NYSE:DKS)’s Omnichannel athlete experience, which created a seamless buying experience for their customers, including athletes.
After the dominant quarter, the company also raised its full-year Outlook, and now expects its EPS to be in the range of $13.55 to $13.90, up from $13.35 to 13.75 previously. Dick’s Sporting Goods, Inc. (NYSE:DKS) is one of the best gun stocks to buy now, with its share price having increased 47.64% in 2024. There is consensus among analysts on the stock’s Buy rating, with an average share price target of $242 which is 11.7% higher than its current level. According to Insider Monkey, 34 hedge funds were bullish about the stock in Q2 2024.
The bearish sentiment, however, stems from the fact the company went through a calendar shift, which resulted in a benefit of $140 million in sales and $0.45 earnings per share. This is likely to be offset negatively in the second half of the year, mainly during the third quarter.
Overall DKS ranks 4th among the best gun stocks to buy now. While we acknowledge the potential of DKS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DKS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.