Are Gun Stocks a Good Buy Ahead of the U.S. Midterms?

The debate over gun control in the United States took centre stage after the Stoneman Douglas High School shooting in February. Weapon stocks like Sturm Ruger & Co. Inc. (NYSE:RGR) and American Outdoor Brands Corp. (NASDAQ:AOBC) plunged in the immediate aftermath. However both have since rebounded as the debate has faded to the background.

Elections have had a marked impact on gun sales and stock prices in recent years. Gun sales boomed during the Obama years as owners stockpiled more weapons, perhaps in fear that a crackdown was forthcoming. The election of Donald Trump, who was a vocal opponent of gun control, caused gun sales to plummet after the November 2016 election.

Recent polls have shown that the gun debate has fallen on the list of voter concerns this summer. Immigration remains the top concern among Republicans and Democrats, with health care and the economy rounding out the other top issues.

There may have been some measure of relief for weapon stock investors after the gun control debate cooled in recent months. Still, gun sales have continued to slump. American Outdoor Brands posted a 32.8% drop in year-over-year sales for the full-year to $606.9 million.

It is possible that a good showing for the Democrats in the upcoming midterms could push gun sales upward once again. Polls seem to indicate that the oft-referenced “blue wave” will be more of a ripple in November. This should maintain the lukewarm environment for gun sales in the latter half of 2018.