Gun Stocks Are on the Rise, While 2 Communications Stocks Are Rallying After Cancelled Merger

U.S stocks have opened higher today, spurred on by a better than expected jobs report. After last month’s report brought fear and anxiety to the market, today’s report has calmed investors, providing further proof that the economy is on the right path.

During the month of June, approximately 287,000 jobs were created in the U.S, toppling economists’ estimates of 175,000 jobs. However, the unemployment rate rose slightly, to 4.9%, while economists were expecting it to rise to 4.8%. The Dallas shooting has also had an impact on several stocks, an aspect we’ll discuss below.

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Gun Stocks Blazing

Gun stocks are flying high this morning in the wake of the Dallas shootings, in which five Dallas police officers were killed and seven more were injured by snipers during a Black Lives Matter protest against police violence.  Smith & Wesson Holding Corp (NASDAQ:SWHC) shares opened 5% higher today, while Sturm, Ruger & Company (NYSE:RGR)‘s stock is 4% in the green. Investors’ reaction to the news is typical, as gun stocks often soar after mass shootings which are perceived as a trigger for increased demand for firearms from customers purchasing guns and ammunition for self protection, as well as existing gun owners adding to their arsenal in the event that gun control legislation is voted in. Less than a month ago, Smith & Wesson Holding Corp (NASDAQ:SWHC) jumped by 6.9% and Sturm, Ruger & Company (NYSE:RGR) surged by 8.5% after 49 people were killed at a nightclub in Orlando.

Hedge fund sentiment towards Smith & Wesson Holding Corp (NASDAQ:SWHC) took a turn for the worse during the first quarter, with the number of funds invested in the company having fallen to 24, down from 27 registered at the end of 2015. The number of funds holding Sturm, Ruger & Company (NYSE:RGR) in their equity portfolios was unchanged during the first quarter at 27. Ken Griffin‘s Citadel Investment Group was invested in both stocks but was exhibiting different sentiment towards them. In its latest 13F filing, the fund reported a 21% reduction in its holding of Smith & Wesson, to 335,136 shares and a 110% increase to its stake in Sturm, Ruger & Company, to 75,983 shares.

On the next page we’ll take a look at a merger agreement that ended prematurely and how a furniture company performed during the second quarter.

Three to Tango

Shares of Polycom Inc (NASDAQ:PLCM) have gained over 12% today after the company announced that it has terminated its previously announced deal with Mitel Networks Corporation (NASDAQ:MITL) so that it can instead be taken over by private equity firm Siris Capital Group LLC. Mitel Networks’ stock is also up by approximately 18% this morning. Back in April, Mitel Networks Corporation (NASDAQ:MITL) announced that it had agreed to buy Polycom Inc (NASDAQ:PLCM) for $2 billion in a cash-and-stock deal. The merger agreement came about after activist Paul Singer acquired stakes in both companies and lobbied for a marriage between them. When the merger was agreed upon, Polycom shares were valued at $13.44 apiece, but both stocks started to slide after the announcement. As the value of the deal kept decreasing, Polycom received a higher offer and Mitel Networks declined to renegotiate. Now, Polycom is set to compensate Mitel with a termination fee of $60 million. Siris Capital has offered $12.50 for every Polycom share, valuing the company at $2 billion, including debt.

At the end of the first quarter, 22 of the funds followed by Insider Monkey were invested in Polycom Inc (NASDAQ:PLCM), up from 18 reported as of the end of December. Together these funds amassed 22% of the company’s common stock. Mitel Networks Corporation (NASDAQ:MITL), on the other hand, was less popular among top hedge funds, with only six of them having reported a stake in the company as of the end of March, down from nine registered a quarter earlier. Jim Simons‘ Renaissance Technologies was betting on both stocks, having indicated ownership of 1.36 million Mitel shares and 1.14 million Polycom shares in its latest 13F filing.

Strong Furniture Demand

Haverty Furniture Companies, Inc. (NYSE:HVT) provided an update on its second quarter sales today, which registered a 3.8% year-over-year increase to $194.8 million. Comparable-store sales rose by 3.8% as well. “Our sales results for the second quarter were as expected and in line with our June 15 sales update. Consumer spending continues to coalesce around traditional holiday sales events reinforcing the importance of a strong brand, excellent online and instore experiences, and demonstrable value propositions. We have new advertising in place and promotional activities planned for the coming weeks to inspire new and existing customers to consider a summer refresh of their home furnishings,” commented Clarence Smith, CEO of Haverty Furniture Companies, Inc. (NYSE:HVT).

The popularity of Haverty among elite hedge funds inched up during the first quarter, as the number of funds with long positions rose to 11 from ten. Shares of the company gave gained 1.5% today.

Disclosure: None