We recently published a list of 10 Best Gun Stocks to Buy in 2025. In this article, we are going to take a look at where Smith & Wesson Brands, Inc. (NASDAQ:SWBI) stands against other best gun stocks to buy in 2025.
America has a deep connection to guns, dating back to its earliest days. The Second Amendment of the Constitution guarantees citizens the right to bear arms. According to a Pew Research Center survey in 2023, about four in ten adults in the country say they live in a household with guns, while 32% personally use one.
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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. About 72% cite protection as the major reason behind owning a gun. Others own the weapon for varying reasons, including gun collection, hunting, sports shooting, and job purposes.
While firearm purchases have been on a steady decline since the pandemic peak, the demand is still reasonably high. The United States is home to a thriving firearms industry that generates billions in revenue every year and provides employment to thousands of Americans. According to The Firearm Industry Trade Association, the sector contributed $90 billion toward the national output in 2023. This was 371% higher than the levels in 2008.
American companies that manufacture and sell firearms, ammunition, and hunting equipment had employed nearly 155,000 people, as of 2023. The market has also created thousands of jobs indirectly in the ancillary and supplier industries, resulting in over 384,000 jobs tied to the sector. Combined, these workers earn around $25.98 billion in wages.
While final figures for gun sales in 2024 are yet to be known, the FBI’s database recorded 5.5 million guns being bought by Americans during the first four months of the year. This was a slight dip year-over-year from 2023. California, Florida, and Texas represented 22% of gun purchases between January and April.
During his election campaign, Trump vowed to defend gun rights and oppose any firearm limits. After being elected President, the 78-year-old signed an executive order aimed at reversing Biden’s actions on the guns. On February 7, the U.S. president asked the Department of Justice to review regulations drafted by the previous administration to look for any ‘ongoing infringements’ of the Second Amendment.
Gun stocks surged last year in July, following the assassination attempt on Trump. The demand for guns and ammunition often sees an uptick after a law and order incident, or when there is chatter about a change in laws that could limit their availability.
Methodology
We scanned Insider Monkey’s database of 900 hedge funds for the third quarter of 2024 to identify gun and ammunition companies. From there, we picked 10 companies with the highest number of hedge funds having stakes in them. Since there are few pure-play gun and ammunition stocks, we have also included sports and outdoor recreation companies selling shooting products in our list.
The best gun stocks to buy are ranked in ascending order by the hedge fund holders in each company. When 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: 15
Smith & Wesson Brands, Inc. (NASDAQ:SWBI) is a firearm manufacturing company headquartered in Maryville, Tennessee. It is one of the leading makers of long guns, handguns, rifles, and other shooting equipment. The company has been operating since 1852 and sells its products to various customers, including competitive shooters, firearm enthusiasts, security agencies, individuals desiring personal protection, sportsmen, and hunters.
On December 5, Smith & Wesson Brands, Inc. (NASDAQ:SWBI) declared financial results for the second quarter of fiscal 2025. It reported net sales of $129.7 million for the quarter, up 46.8% sequentially and 3.8% from last year, driven by the strength of the new Bodyguard 380 pistol and lever-action rifle. Gross margin stood at 26.6%, compared to 25.4% in the prior year’s quarter. GAAP net income for the quarter was $4.1 million, or $0.09 per diluted share, compared with $2.5 million, or $0.05 per diluted share, in Q2 2024.
However, the results came below Smith & Wesson Brands, Inc. (NASDAQ:SWBI)’s expectations as demand for firearms normalized late in the quarter. Due to inflation-driven pressures on demand, the company expects the top line to be between 10% and 15% lower year-over-year for the third fiscal quarter. SWBI’s share price is down 24% since the announcement of a grim forecast for Q3.
Despite a challenging environment, there are still enough reasons to remain bullish on the stock as it continues to outperform the market. Smith & Wesson Brands, Inc. (NASDAQ:SWBI) has been encouraged by the successful launch of new products, which represented 44% of the company’s sales in the recent quarter. Moreover, the firm authorized a new $50 million share repurchase program, reiterating its commitment to shareholder returns.
Wall Street analysts have a consensus Buy rating for SWBI and anticipate a 21% uptick, on average, in its share price. According to Insider Monkey’s database for Q3 2024, 15 hedge funds held a stake in the company, making it one of the best gun stocks to buy.
Overall, SWBI ranks 7th on our list of best gun stocks to buy in 2025. While we acknowledge the potential of gun companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. 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.