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 Olin Corporation (NYSE:OLN) 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 factory worker in heavy protective clothing, overseeing the production of chlorine.
Olin Corporation (NYSE:OLN)
Number of Hedge Fund Holders: 39
Olin Corporation (NYSE:OLN) is an American manufacturer and distributor of ammunition, sodium chloride, and chlorine. Headquartered in Clayton, Missouri, it traces its origin to two companies – Equitable Powder Company and Mathieson Alkali Works – both founded in 1892. The company has three business segments, Chlor Alkali Products, Vinyls, and Winchester, with the latter focused on arms and ammunition.
During the second quarter of the year, the company generated sales worth $1.64 billion, with a net income of $74.2 million, which represented an earnings per share of $0.62. While this met analysts’ expectations, the figures were considerably low year-over-year, with 2023’s net income being $146.9 million and EPS of $1.13. The company has been navigating through several challenges, which has led to its share price drop 20% this year.
Global industrial activity continues to remain slow and subsequently, the demand for American chlorine has still not reached pre-Covid levels. On the other hand, the demand for commercial ammunition at Winchester also remained low and the rise of costs of propellants created a headwind as well. Hurricane Beryl in July this year has also been a huge setback, costing the company around $100 million, which is set to affect results in Q3.
Having said that, Olin Corporation (NYSE:OLN) is determined to adjust to market demand and challenges. It is actively focusing on cost-saving strategies, and as part of that, has already reduced its annual spending plan by $25 million. Moreover, the company has deferred its international tax payment of $80 million to 2025. These measures are likely to help improve cash flow, and the management is optimistic that its end-of-year working capital will be similar to what it was at the end of 2023. Olin Corporation (NYSE:OLN) is also optimistic about military sales considerably increasing during the second half of the ongoing fiscal year.
There is a mix of bearish and bullish opinions on the stock. However, based on Insider Monkey’s database, Olin Corporation (NYSE:OLN) is the best gun stock to buy now with 39 hedge funds owning stakes in the company. There is also a consensus among analysts on the stock’s Buy rating. In August this year, BlackRock Inc. further strengthened the bullish sentiment around the stock after it increased its total holdings in the company by acquiring an additional 333,632 shares, taking its total ownership in Olin Corporation to nearly 12 million shares.
Overall OLN ranks 1st among the best gun stocks to buy now. While we acknowledge the potential of OLN 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 OLN 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.