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 Smith & Wesson Brands, Inc. (NASDAQ:SWBI) 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).
An overhead aerial shot of a gunsmiths workshop, surrounded by tools of the trade.
Smith & Wesson Brands, Inc. (NASDAQ:SWBI)
Number of Hedge Fund Holders: 17
Smith & Wesson Brands, Inc. (NASDAQ:SWBI) is a firearm manufacturing company headquartered in Maryville, Tennessee. The company has been operating since 1852 and is one of the leading manufacturers of long guns, handguns, and other shooting equipment.
The company announced its full-year FY24 results in June, during which it had net sales of $535.8 million, 11.8% higher YoY. GAAP net income for the year was recorded at $39.6 million, up from $36.9 million in 2023. EPS for 2024 was measured at $0.92 compared to $0.94 in the year prior. The strong financial performance was due to an increase in production to meet the demand for both new product offerings and existing core portfolios. A key driver was consumer reception towards the company’s innovation, with new products accounting for around 30% of overall sales.
However, the management at Smith & Wesson Brands, Inc. (NASDAQ:SWBI) anticipated seasonal patterns for firearms to adversely affect sales, as high inflation in the US decreased discretionary consumer spending. Mark Smith, the company’s President and CEO, shared the following remarks in Smith & Wesson Brands, Inc. (NASDAQ:SWBI) Q4 2024 Earnings Call:
We are anticipating a much more competitive marketplace throughout the traditionally slower summer month this year as consumer discretionary spending continues to be impacted by stubborn inflation, as you have likely seen from recent NICS results. This is consistent with normal seasonal patterns for firearms demand, and we do expect offsetting tailwinds during our typical busy season throughout the second half, as the Presidential election campaign activity ramps up in the fall and we benefit from new product introductions and we bring online additional capacity targeted at some of our new products where we are currently constrained. Throughout the slow period this summer, we will be aggressively pursuing market share through promotions and marketing campaigns in addition to building inventory in preparation for the busy fall season and continuing our cadence of new product introductions.
Having said that, the company’s successful new product launches are likely to continue to bolster sales and drive the bullish sentiment around the stock. Smith & Wesson Brands, Inc. (NASDAQ:SWBI) is one of the best gun stocks to buy now with 17 hedge funds in Insider Monkey’s database owning stakes in the company. Street analysts also maintained a Consensus Buy rating on the stock, with an average share price target of $18, representing a 37.4% upside.
Overall SWBI ranks 6th among the best gun stocks to buy now. While we acknowledge the potential of SWBI 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 SWBI 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.
