Gun stocks are muted in early trade

Share prices of arms and ammunition companies often rise after mass shootings, with investors anticipating a spike in sales ahead of calls for tougher gun laws. The day after a deadly elementary school shooting in Uvalde, Texas, on Wednesday, prices of major gun-related stocks rose after a lackluster start.

Smith & Wesson and Vista Outdoor both rose around 7%, while Sturm Ruger gained more than 4%. The stock market as a whole rose about 1%.

“The gun industry has perverse incentives,” said Dru Stevenson, a professor at the South Texas College of Law in Houston, “because sales and their inventory go up when there are events like this.” .

Shares of gunmakers have also generally increased since President Biden’s election, as is usually the case under Democratic administrations when tougher gun control measures get more attention. “As a nation, we have to ask ourselves, when in God’s name are we going to stand up to the gun lobby?” Mr Biden said on Tuesday, saying it was “time to turn this pain into action”.

Immediately after the Uvalde shooting, the second deadliest school shooting on record, Democratic lawmakers led the way to force a vote on legislation that would strengthen background checks on gun buyers, who had previously been blocked by Republicans. “We’ve been burned so many times before,” Majority Leader Sen. Chuck Schumer of New York said of previous attempts to broker a bipartisan compromise on gun safety laws, suggesting that this latest attempt will also face long odds.

The rise in gun-related stocks on Wednesday was a stronger reaction than that following the attack at a Buffalo grocery store last week, when many of those companies’ stocks initially rose but ended the day little changed in the first trading session after the shooting. After the 2012 attack in Newtown, Connecticut, the deadliest school shooting, many gun stocks plummeted in the days that followed.

“Stockpiles are going up because people think there’s going to be a spike in arms sales, not because they think there’s going to be new restrictions,” says Alex Barrio, director of advocacy for the prevention of gun violence at the liberal-leaning Center for American. Progress. “It’s a bet on fear.”

Gun sales surged during the pandemic, setting new monthly records as some feared the coronavirus outbreak could lead to civil unrest. It wasn’t necessarily a boon for some gun companies, with Remington filing for bankruptcy in mid-2020 for the second time in two years, struggling to pay its high debt and legal costs. In February, the families of nine victims of the Sandy Hook school shootings settled a $73 million lawsuit with Remington, which made the AR-15-style rifle used in the attack. It was one of the largest and most important settlements to date, as federal immunity for gunmakers provides strong protection against litigation.

Gun control advocates recently called on the Federal Trade Commission to investigate and regulate the gun industry as it did the tobacco industry, accusing the companies of deceptive advertising practices. The State of New Jersey is pursuing a lawsuit against Smith & Wesson over the way it markets its products, seeking the release of internal documents.

The rise of “socially responsible” investing has also shone a spotlight on the gun industry. Major fund managers like BlackRock and Vanguard hold gun stocks in many of their funds, mostly index funds that track the broader market or focus on smaller companies, such as manufacturers of weapons like Smith & Wesson and Sturm Ruger. Gun and ammunition sellers, like Walmart, Big 5 and other retailers, are even more common holdings in many mutual funds, index funds and broad-based pension funds.

After the mass shooting at a high school in Parkland, Fla., in 2018, Jon Hale, director of sustainability research for the Americas at Sustainalytics, a unit of investment research firm Morningstar, said he heard from advisers financiers who were “getting all kinds of calls from customers worried about whether they have guns in their wallets. That interest, part of a general increase in attention to investing in funds with environmental, social and governance, or ESG, principles, has continued to grow, he said.

There are now many ESG-based alternatives to popular index funds that screen gun-related stocks with minimal effects on performance or cost, Hale said. Online tools like Gun Free Funds, run by the nonprofit As You Sow Foundation, provide information on gun stocks in funds that appear in the portfolios and retirement accounts of many investors.

“School shootings really grab people’s attention” in a way that other mass shootings may not, Hale said. And with the Texas attack coming so soon after the Buffalo shooting, he expects financial advisers to face a further spike in calls about gun stocks from clients. “Maybe they thought about it before,” he said, “and something like this happens and it reminds them again: I should check my investments.”

stephen gandel contributed report.

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