Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

PulteGroup, Inc. (PHM): The Reality TV Show Indicator

Doomsday Preppers and the gun bubble

Since President Obama was first elected, the firearms industry has seen record demand for guns and ammunition. Some of this demand is likely based on the fear of future restrictive laws — better to buy your guns today, for you might not be able to get them tomorrow.

But a fair amount of demand may be originating from the survivalist movement, which has seen a surge in popularity following the 2008 financial crisis.

A number of media outlets have noted the growing trend, such as Popular Mechanics and AZ Central. At the same time, retail giants like Costco are cashing in, offering long-lasting food crates aimed at survivalists.

And like gold and house flipping, reality TV has gotten in on the survivalist trend. National Geographic’s Doomsday Preppers chronicles families preparing for the coming apocalypse — a practice which frequently includes stockpiling large amounts of guns and ammunition.

Discovery Channel offers a similar take on the trend — its Doomsday Bunkers is a show about a company that builds underground homes for survivalists.

How much of the growth in firearm demand is coming the survivalist movement? It’s hard to say. At any rate, shares of Sturm, Ruger & Company (NYSE:RGR) have certainly benefitted, rallying well over 500% in the last five years.

Either way, at some point, it’s likely that the people stockpiling firearms will have to stop. Guns are the very definition of durable goods — they can easily outlive their owners. And while few buy a single gun, there’s definitely a ceiling on demand.

This belief in peak gun demand may be behind Ruger’s persistently high short interest. Within the last six months, Ruger has carried a short interest  as high as 40%.

Today, short interest is around 25% — still high, but far removed from peak levels. The stock offers an attractive 3.50% dividend yield, but if the bears are ultimately right, gun demand should eventually plunge, taking Ruger’s shares with it.

The tastiest bubble of all

Bakeries dedicated to a single good — cupcakes — have exploded in popularity in recent years. Of course, there have been plenty of cupcake-orientated shows to go along with the trend.

There’s Food Network’s Cupcake Wars, TLC’s DC Cupcakes, and WE TV’s Cupcake Girls. All shows center around the production of the small pastry.

While the fallout from the bursting of the cupcake bubble might have hurt small business owners the most, there is one publicly traded stock that has suffered.

Crumbs Bake Shop had its IPO in the summer of 2011, near $13 per share. The chain has locations in 13 US states, mostly on the east coast, and sells gourmet cupcakes.

Evidently, Crumbs’ ownership picked the perfect opportunity to cash out. Shares have mostly traded in one direction since the IPO — down — and currently sit around just $1.23. As the Wall Street Journal noted back in April, people might just be suffering from gourmet cupcake burnout.

Realty show indicators

Don’t get me wrong, I’m not saying investors should turn to reality TV to make their investment decisions. However, reality TV has an impressive ability to highlight major, societal fads.

If one suspects that a trend currently gripping American society is just a fad — and there’s some economic bubble tied to that fad — a string of related reality TV shows might just be the perfect confirming evidence.

No Pitch

Joe Kurtz has no position in any stocks mentioned. The Motley Fool owns shares of Sturm, Ruger & Company (NYSE:RGR).

The article The Reality TV Show Indicator originally appeared on

Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.