Best Gun Stocks To Buy: Whether for self defense or a collection, gun ownership is an American rite of passage for many. People loaded up on guns and ammo ahead of worsening economic conditions and concerns over a change in White House administration. By early 2021, gun sales had skyrocketed 80 percent.
Background checks are surging around the country, as the FBI reports 3.9 million firearm checks. October alone saw a 60 percent year-over-year increase in firearm background checks. After the election dust settled, five companies stood out as solid buys in the eyes of investors.
Sturm Ruger Continues To Pay A Steady Dividend
Sturm, Ruger & Company Inc (NYSE:RGR) is a Connecticut-based firearm manufacturer and one of the largest in the country. It makes a variety of rifles, handguns, and shotguns and produces millions of weapons each year.
The company boosted production in 2020, hiring 250 workers and increasing output by 30 percent in the second half of the year. Even with the extra help, products are flying off the shelves in stores around the country as consumers stock up.
Sales in 2020 were 39 percent higher than the prior year, ringing in at $568.87 million. Of that, the company’s $90.4 million profit represents a 180 percent increase from 2019.
However, the company’s share price peaked at $90.74 in August 2020. The company entered 2021 with a market capitalization of around $1.25 billion and could likely support more elevated prices. It’s been trading at 13.8x trailing 12-month earnings.
Unlike many companies, Ruger continued paying dividends during 2020. In fact, the August dividend that drove its share price up came in at $5.42 per share. Its March 2021 dividend of $0.71 reflects the company’s increased sales for the quarter.
Dividend investors love the company’s track record, and gun fans continue cherishing their Ruger weaponry.
Smith and Wesson Has Been A Controversial Play
Smith & Wesson Brands Inc (NASDAQ:SWBI) is a Springfield, Massachusetts-based firearm, ammunition, and restraints manufacturer. The company has been the center of a lot of controversy over the years.
In the 2010s, Smith & Wesson faced scrutiny after its M&P15 (a semi-automatic rifle designed like the AR-15) was used in three high-profile mass shootings. These included the 2012 shooting in Aurora, Colorado, 2015 San Bernardino attack, and 2018 Stoneman Douglas High School massacre.
The company creates an arsenal of weaponry, including rifles, pistols, submachine guns, and shotguns (including the automatic shotgun Smith & Wesson AS). On top of this, it creates many of the handcuffs, leg irons, belly chains, and prisoner transport chains used in jails and prisons.
S&W’s 2020 annual report showed 20.3 percent year-over-year increase in sales, including a 5.5 percent bump in its sporting goods channels. This would be for hunting equipment versus personal protection and self-defense.
Net sales of $678.4 million gave the company $116.3 million in non-GAAP adjusted EBITDA.
SWBI stock crashed to a 52-week low of $5.52 but quickly recovered to a high of $27.79 that hadn’t been reached since 2016. This was because gun stores were sold out by summer as protests and riots ravaged the nation.
Gun sales (and investments in gun companies) could be a good bet with the new administration. There’s no specific news in 2021 to explain it, but the stock is still getting occasional pushes to break through that $20.00 price range sustainably.
This gives the company a $1 billion+ market capitalization and P/E ratio just over 25x. Even if it doesn’t grow over the next four years with aggressive gun laws coming, it recently instated a dividend payout to shareholders.
Its 1.09 percent dividend yield comes out to an annual cash payment of $0.20 per share, and payments were made in September and December 2020. If the company keeps up this pace, investors could have a fruitful four to eight years.
Olin Makes Gun Powder and Cartridges
Olin Corporation (NYSE:OLN) isn’t a gun manufacturer – it makes gun powder and cartridges, along with other chemicals used in every day products. It started with explosives for coal mines and limestone quarries in the 1800s, before expanding into ammunition.
In fact, the U.S. military presence in Iraq and Afghanistan through the 21st century gave the company plenty of regular business.
The company also owns the Winchester brand name, which it licenses out to generate additional income streams.
Its stock price crashed to a 52-week low of $8.76, before climbing to over $30.00 per share. The company has a valuation of around $5 billion.
OLN pays a steady dividend, and shareholders receive a quarterly $0.20 cash payment for a 2.67 percent annual yield.
And because it has other chemical businesses, the company isn’t fully tied to the sentiment toward guns and ammo. This diversification makes it a standout among competitors.
Axon Enterprise Owns The Taser Brand
Axon Enterprise Inc (NASDAQ:AXON) is a Scottsdale, Arizona-based company that develops personal defense products that aren’t guns. You have likely heard of its Taser brand name, and the company also creates many of the bodycams used by law enforcement.
With body cameras comes software and data platforms that track law enforcement movement and behaviors. This puts the company in a great position to benefit from any policy changes that push law enforcement toward non-lethal weapons and/or accountability.
Much of the 2020 BLM protests revolved around police brutality and mistreatment of minorities, especially in low-income areas. Some analysts believe the new liberal power dynamic will push for more police accountability, including body cameras and push for non-lethal force.
The company earned about $640 million in 2020, and AXON share price ended the year at an all-time high. Its $11 billion market capitalization shows how much more growth potential it has over gun manufacturers themselves.
Guns are a cyclical business, as each mass shooting forces regulation that leads to customers rushing in to stock up on products before they’re banned. It’s a part of the American culture, whether you like it or not.
Axon is essentially the competition to guns – cameras and non-lethal force. That makes them a solid bet regardless of which direction gun laws go.
Ammo Is At The Heart Of Vista Outdoor Revenues
Vista Outdoor Inc (NYSE:VSTO) is an umbrella company that encompasses over 40 outdoor brands, including several gun, scope, and munitions brands. Subsidiaries include Savage Arms, Federal Premium Ammunition, CCI, CamelBak and Bushnell.
Interest in outdoor exploration exploded in 2020, as social distancing guidelines and work-from-home lifestyles made trips to the outdoors a necessary break for many.
But ammunition is the meat and potatoes of the company’s revenue streams. The company has around $1 billion in backlogged ammunition orders in early 2021, as customers rushed to stock up after the election.
This pushed the company’s share prices over $30.00, a level it hasn’t reached since 2016. Should this $2 billion company fulfill its backlog and continue selling, it could have another banner year in 2021.
And the diversification helps it benefit from more than just gun sales and military uses. Vista Outdoor is heavily focused in hiking, camping, mountain climbing, and other exploration. When the economy reopens, people are likely to get out the house even more, and Vista Outdoor will be ready.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.