As the Gun Control Debate Heats Up, So Will This Stock

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Gun Control
Just three weeks after the movie theater killings in Aurora, Colo., is it too soon for us to be talking gun control? A resounding "no" comes from a surprising source: American gun owners and members of the National Rifle Association.

Most debates concerning gun control break down into two camps. On the left are those who see easy access to firearms as a root cause of thousands of murders each year, as well as countless shooting injuries, and argue that guns should be regulated -- and in the case of the most lethal, banned -- or, at the very least, made to carry fewer bullets.

Meanwhile, on the right, the prevailing attitude to gun control can be summed up in five growled words: "From my cold, dead hands."

This is why it's surprising to learn that a recent poll -- conducted by Republican Party pollster Luntz Global, no less -- showed that 82% of gun owners support such common-sense measures as making criminal background checks (which are conducted over the phone in a few minutes, while a customer waits) required to finalize gun purchases.

Other questions posed in the survey elicited equally surprising results. In sharp contrast to the NRA's leadership, it turns out NRA members by and large support laws that would:
  • Limit issuance of "concealed carry" permits to those who are 21 years of age and older (63%) and have completed a gun safety course (74%).
  • Ban the sale of firearms to anyone who has been arrested for an act of domestic violence (68%), is on a terrorism watch list (71%), or has been convicted of a violent misdemeanor or felony (75%).
  • Require gun shop owners to inform police when firearms are stolen or "lost" (64%) and conduct criminal background checks on gun store employees to discourage such incidents from happening (79%).
And remember -- that's just the NRA members. Folks who own guns themselves, but don't necessarily support the NRA, favor these restrictions by even larger majorities.

Are they right? With apologies for speaking bluntly, it really doesn't matter. The sentiments contained in the Luntz poll suggest that the Aurora massacre will create enough support for gun control that, once the fall election is over, we'll soon have a fight over the issue in Congress. And that's what's really important to you, the consumer.

What the Gun Control Debate Means to You

While it may be hard to imagine Congress successfully passing new gun control regulation today, it has happened before -- from 1994, when the Brady Bill was passed, to 2004, when federal law restricted the sale of large-capacity magazines and certain semiautomatic rifles. That bill passed after three years of back-to-back, high-profile "gunfire incidents": the 1991 massacre in Killeen, Texas, which claimed the lives of 22 people; Ruby Ridge in 1992; and the Waco siege in 1993.

For the presidential election, how important is the gun control platform to you?
Gun control is one of my top watched political issues.652 (29.6%)
Gun control is not as important as other issues, but it should not be ignored.398 (18.1%)
There are more pressing topics our country needs to act on.1152 (52.3%)
In the middle of an election year, and with President Obama unready to take a stand on the issue, it's no sure thing that even a tragedy like the Aurora shootings will result in legislation coming to the floor of Congress. Only one thing is certain, as Businessweek assistant managing editor Paul Barrett pointed out in his book Glock: The Rise of America's Gun: Tragedies such as Aurora always lead to talk of gun control legislation, and that always leads to more gun sales as civilians rush to buy guns "before they get banned."

No sooner had the Brady Bill been passed, for example, than gun sales went "through the roof." Glock in particular rushed 5,000 pistols from its factory in Austria to dealers in the U.S. -- and still said it was "tens of thousands of orders behind." Meanwhile, pre-ban weapons, with their larger magazines, saw their resale values skyrocket. As Barrett noted, one particular flavor of Glock that sold in 1994 for $510 fetched 50% more by 1995 -- used.

So what does all this mean to you? In a word...

Profit

As sure as day follows night follows day, gun tragedies beget gun debates, which beget higher sales for gun manufacturers. Even as you read this, gun store owners across America are ringing up record sales.

Four weapons in particular are likely to prove hot items for regulators and gun buyers alike: the Smith & Wesson M&P 15 semiautomatic rifle, Remington's 870 12-gauge shotgun, and Glock's .40 caliber handguns -- the G22 and G23 in particular.

Savvy investors will notice right away that unlike Glock and Remington Arms, Smith & Wesson (SWHC) is a publicly traded stock -- and it's been flat since Aurora. Even three weeks after the news broke, there's still plenty of time to buy it.

Whether or not Congress succeeds in "taking away your guns" isn't the point here. The mere fact that they're going to try gives investors a chance to profit.

Motley Fool contributor Rich Smith holds no position in any company mentioned. The Motley Fool has a disclosure policy.

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