Gun stocks are soaring as Obama proposes new gun control measures

A push to reduce the supply of guns usually pushes up demand.
A push to reduce the supply of guns usually pushes up demand.
Image: AP Photo/David J. Phillip
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Another gun control measure, another rally for gun stocks.

As US president Barack Obama spoke about his proposal to further regulate firearms, shares of Smith & Wesson climbed more than 10% in midday trading today (Jan. 5), while Sturm, Ruger & Co. moved up 7%.

Although most Americans don’t own guns and want more gun control, a minority who do own guns end up buying more of them when they feel that stricter regulation—or even just the threat of it—is coming down the pike. And that’s what is set to happen now that Obama, after being repeatedly frustrated by Congress, has chosen to pursue the issue unilaterally with executive action that would:

  • Require gun sellers who operate at gun shows and on the internet to be licensed, and subject them to criminal prosecution that can include up to five years in prison and a $250,000 fine if they are not.
  • Close a “loophole” that allows gun buyers to acquire items like machine guns without background checks through a “gun trust”(paywall), a legal entity originally created to allow gun owners to pass weapons to their family members. The number of gun trust applications grew from fewer than 900 in 2000 to more than 90,000 in 2014, the White House said.
  • Add 230 new Federal Bureau of Investigation staff to process mandatory background checks, and 200 more people to the Bureau of Alcohol, Tobacco, and Firearms to enforce existing gun laws.
  • Make gun dealers responsible for reporting guns that go missing.
  • Spend another $500 million to “engage” individuals with serious mental health issues in care.

As Quartz noted just this morning, it was a pretty good December for gunmakers: The US government undertook a record 3.3 million background checks in the wake of the San Bernardino, California, mass shooting. The previous record was 2.7 million in December 2012—after another mass shooting, in Sandy Hook, Connecticut).

Last year as a whole was a solid one for both Sturm, Ruger (up 72% in 2015) and Smith & Wesson (up 132%), and they’ve only climbed from there.