Replies

“’I predict the drop will be minimal, if it happens at all.”

How Trump’s Victory Killed the Gun Rally

Gun owners flocked to buy firearms fearing a Clinton victory. When that didn’t happen, the share prices of gun makers tumbled

November 12, 2016

Misfire: With Trump as president, the pressing need to hoard guns in the event of tougher regulations fizzled. Illo: William Waitzman for Barron’s

Even hardcore Donald Trump supporters saw Hillary Clinton as a shoo-in, and as they have in the past two elections, they trekked to their local gun emporiums in large numbers to stock up on firearms in case gun controls tightened. A week before the election, Sturm, Ruger (ticker: RGR) President Christopher Killoy boasted in a shareholder conference of a 19% nine-month increase in demand, bolstered “by the political campaigns,” and a 20% production surge “in anticipation” of post-election demand.

Then Donald Trump inexplicably won. Blam! Gun stocks crashed. Share prices of both Smith & Wesson Holding (SWHC) and S&R plunged about 15%. S&W shares fell from about $28 to $21; S&R thudded from $64 to $48.

With Trump as president, the impulse to hoard guns in the event of tougher regulations fizzled. Now, dealers find themselves staring at a lot of excess inventory, which might take months to whittle down. Chris Krueger, an analyst with Minneapolis-based Lake Street Capital Markets, has a $37 price target on S&W shares, which he expects will flounder for a month or two, until inventory normalizes and shares return to pre-campaign levels.

—Jack Willoughby

http://www.barrons.com/articles/how-trumps-victory-killed-the-gun-rally-1478931228

MoneyBeat

Short-Sellers Win Big on Falling Gun-Maker Stock

By Ben Eisen
Nov 11, 2016 5:45 pm ET

Shares of gun-maker Smith & Wesson Holding sank 22% this week, including a 15% slide on Wednesday.

That’s good news for holders of the $264 million of short positions, who made a quick $63 million in profits from betting on the stock to decline, according to S3 Partners, a financial analytics firm.

Donald Trump‘s U.S. presidential election victory hit gun stocks particularly hard. They typically increase when there’s talk of enhanced gun regulations because the market expects firearms enthusiasts to run out and buy guns. Mr. Trump’s win, however, pushed gun stocks down because his policies aren’t thought to favor heavier gun regulation.

It’s one example of how Mr. Trump’s victory is reordering winners and losers in the stock market, prompting sharp moves that some have viewed as overreactions during a period where details of the president-elect’s policy priorities are still being ironed out.

An investor who bets against a company’s stock by selling it short typically borrows the shares from a broker or other investor who holds it outright. The short-seller then sells the stock and buys it back at a later date, hoping that it’s fallen during that period.

Short interest in Smith & Wesson climbed from $243 million in early November leading up to the election. Since the vote, investors have largely kept their short positions in place, according to Ihor Dusaniwsky, head of research at S3 Partners, a sign they are anticipating a further decline.

http://blogs.wsj.com/moneybeat/2016/11/11/short-sellers-win-big-on-falling-gun-maker-stock/