Sturm, Ruger & Company (RGR), Smith & Wesson Holding Corporation (SWHC): The IRS Made Me Sell My Gun Stocks

If you disagree

For investors that disagree with my assessment, and want to own gun stocks, I think Sturm, Ruger & Company (NYSE:RGR) is the better buy here. It’s more heavily shorted than Smith & Wesson Holding Corporation (NASDAQ:SWHC), which means that long investors should benefit more from any short squeeze.

There’s also Alliant Techsystems Inc. (NYSE:ATK) which, trading a price-to-earnings ratio near 9, is cheaper than Sturm, Ruger & Company (NYSE:RGR); and, as a producer of ammunition, should presumably be less affected by a decline in gun sales, if one materializes.

However, Alliant Techsystems Inc. (NYSE:ATK) remains dependent on government defense contracts for much of its revenue, thus, although many investors view it as a play on the retail gun market, it’s much more complicated than that — government budget cuts could adversely affect its business.

Gun stocks

Gun-makers and gun-related stocks have been on a tremendous run recently, largely on the looming threat of new gun laws. But with the political focus shifting away from gun control, that demand could be coming to an end. At the same time questions of durability and long-term demographics remain a threat to the business models of these companies.

The article The IRS Made Me Sell My Gun Stocks originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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