Northern, WI 12/18/2012 (BasicsMedia) — Normally 1 event can change the direction of an equity sub-sector and turn it on a dime. The horrendous – senseless -media cycle dominating killings of children in Connecticut has halted the rise in share prices for gun stocks in their tracks. Even writing this article I stay away from any insensitive verbiage which would offend or cause any additional suffering for anyone reading this article who may have been effected.
America clings to it’s rights to bear arms, and I believe that will never change, and I am not a gun enthusiast, although I live in a thriving gun community here in Northern Wisconsin and see the joy it brings fathers and sons hunting game for sport, that should not change, but changes are afoot, and we cover US Stocks so I need to write about what is occurring in the value of any asset. In the case of gun stocks…the move is over after a long run, and it stopped the moment that killer walked through the door of that classroom.
Shares of Smith and Wesson (NASDAQ:SWHC) were up 150% from the start of January 2012 as we began Q4 and seemed unstoppable trading near $11 p/s for the year…today they are at $8.25 and look like they have more downside and look for a retst of the $6.25 level for this stock before it reaches any support. Keep in mind, little has changed in terms of revenue for the quarter, but changes will come for them and it will immediated be priced into the stock. The shooting and public outcry cut 50% of the companys value in 48 hours. Thats is called turning on a dime, and you needed to be very nimble to exite your position. The same scenario exists for Ruger Firearms (NYSE:RGR) although some % movements are different.
Even private equity is exiting this morning when the private equity firm Cerberus Capital Management said on Tuesday that it would sell its investment in the gunmaker Freedom Group in response to the school shootings last week in Connecticut. Cerberus acquired Bushmaster — the manufacturer of the rifle used by the gunman in the Newtown attacks that killed 27 people, including 20 schoolchildren — in 2006.
The private equity giant later merged it with other gun companies to create Freedom Group, which reported net sales of $677.3 million for the nine months that ended in September 2012, a 20 percent increase compared with the same period last year. “It is apparent that the Sandy Hook tragedy was a watershed event that has raised the national debate on gun control to an unprecedented level,” Cerberus said in a news release.
Any investment in gun stocks is over for many, many years to come…..god rest the souls of those children.
Disclaimer: We have no position in any stock here.