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Smith & Wesson Holding Corporation (SWHC), Cabelas Inc (CAB): Now That Gun Control Has Failed, It’s Time to Buy Gun Stocks

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Yet another blow was delivered to proponents of gun control on Tuesday, when four Democratic Senators opted to break with their party and vote against expanding background checks for gun purchasers.

The bipartisan Manchin-Toomey amendment was seen as the weakest of the proposals aimed at restricting gun ownership; with it failing, the regulatory threat facing companies like Sturm, Ruger & Company (NYSE:RGR), Smith & Wesson Holding Corporation (NASDAQ:SWHC) and Cabelas Inc (NYSE:CAB) has vanished entirely.

President Obama: a gun bull’s best friend

Obviously, this topic carries a high degree of political controversy, but this piece is in no way meant to be political. It is an objective fact that while Obama has been in office, gun sales have exploded to record levels — along with the profits of the companies selling them.

Since Obama was inaugurated on Jan. 20, 2009, shares of Sturm, Ruger & Company (NYSE:RGR) are up an astounding 671%. Competitor Smith & Wesson Holding Corporation (NASDAQ:SWHC) is up a less impressive (though still incredible) 231%. Cabelas Inc (NYSE:CAB), which is a major gun retailer, has rallied nearly 900%. For comparison, the S&P 500 is up about 83% over that time.

There are likely a number of factors behind the explosion in gun sales, including a lingering fear of a global economic collapse exacerbated by the financial crisis of 2008. TLC’s reality show “Doomsday Preppers” has, over 30 episodes and two seasons, profiled dozens of American families stockpiling guns in fear of the coming apocalypse.

But looming large has been a belief held by many Americans that Obama wants to confiscate guns. A Rasmussen poll revealed that 44% of Americans believe this. Even Phillies’ pitcher Jonathan Papelbon harbors this idea, remarking in an interview that “Obama wants to take our guns from us.”

The government has created a false sense of scarcity

Until the tragedy at Sandy Hook Elementary, Obama and the Democrats have made no meaningful attempt at gun control. Yet, the paranoia that it was only a matter of time has fueled the rise in sales.

This can be seen when, just after the Sandy Hook shooting, guns sales exploded to an even greater degree. For, after four years of being in office, Obama was finally planning to confront the issue of gun control.

A sense of scarcity has long been known to drive sales — it’s accepted as common sense. Many companies utilize the principle when they can, including Lululemon Athletica inc. (NASDAQ:LULU), which intentionally keeps a limited amount of its product in stores.

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