Gun Ban Could Actually Be a Boon for Weapons Manufacturers

Gun appreciation day
On Saturday, a coalition of "gun rights and conservative groups" intends to hold the first nationwide "Gun Appreciation Day" in America. If all goes according to plan, Americans will "show their support for gun ownership by turning out en masse at gun stores, ranges, and shows from coast to coast."

The timing's not coincidental. According to a press release announcing the event, the aim here is to "send a message to Washington two days before Obama's second inauguration." And in case there was any doubt whom the organizers aim to influence, event chairman Larry Ward, president of Republican consulting firm Political Media, declares: "The Obama administration has shown that it is more than willing to trample the Constitution to impose its dictates upon the American people."

Notable No-Shows

So far, Gun Appreciation Day has attracted a range of sponsors, including the Second Amendment Foundation, Citizens Committee for the Right to Keep and Bear Arms, Special Operations Speaks, Revolution PAC, Citizens and Country, Social Security Institute, Committee to Draft Judge Andrew Napolitano, Conservative Action Alerts, Women Warriors PAC, Conservative Action Fund, and Political Media.

Notably absent from the list: the National Rifle Association.

Also noteworthy for its absence is a group that, in theory, would have the most to lose from tightened gun regulation: the gun makers.

The world is full of gun manufacturers, from Forjas Taurus in Brazil to Beretta and Glock in Europe to the Freedom Group (owned -- for the time being, at least -- by private equity fund Cerberus Capital) in the United States to Browning Arms, based in the U.S. but owned by Groupe Herstal in Belgium. But so far, not one of these makers of pistols, revolvers, shotguns, bolt-action or semiautomatic rifles has agreed to take part in Gun Appreciation Day.

They may simply be playing duck-and-cover from the political firestorm that's erupted after Aurora and Sandy Hook. But there's another possibility to consider as well -- the possibility that tightened regulation on gun sales may not be altogether bad news for the industry after all.

The Unintended Consequences of Laws

In "Glock: The Rise of America's Gun," his work on the recent history of the American gun industry, author Paul Barrett notes that "for the gun industry, and especially Glock, [President Clinton's 1994] assault weapons ban turned out to be far more notable for its unintended consequences than for its goal of restricting the spread of semi-automatic firearms."

We've all seen in recent weeks the stories about how threatened action on gun control has sent Americans flocking to gun stores to stock up on guns and ammunition "before they're all banned."

That happened in 1994 as well, and it was only one side effect of the 1994 assault weapons ban. According to Barrett, at the same time as Glock sold pre-ban handguns hand over fist in the lead-up to regulation, it also profited by buying back high-capacity clip "trade-ins" from Glock owners after the law went into effect, and resold them used (often at prices even higher than they fetched when brand new) -- which was permitted under the law.

Meanwhile, the restrictions on the sale of these same large-capacity clips spawned an entire new category of "pocket pistols."

Forbidden to sell handguns with 17-round clips, for example, gun manufacturers simply invented -- and then touted as convenient "concealed-carry" weapons -- new smaller handguns that held only six, seven, or perhaps 10 rounds. And proceeded to sell the heck out of them.

Sales Growth That's Faster Than a Speeding Bullet

Because two major gun manufacturers -- Sturm, Ruger and Co. (RGR) and Smith & Wesson (SWHC) -- are publicly traded and therefore must publicly report their financial results, we can examine their records from the time to see how tightened gun regulation affected the rest of the industry.

Financial details on both companies are available for the latter portion of the period covered by the 1994-2004 Assault Weapons Ban. In the case of Ruger, the ban does appear to have had an effect, in the form of a 31 percent decline in sales from 1998 to 2004. And yes, the lapse of the ban helped Ruger grow its sales 25 percent between 2004 and 2008. So far, this is as you'd expect. But now consider the case of Smith & Wesson.

Smith &Wesson's public financials only go back to 2002, but even that's far enough to show us that from 2002 to 2004 -- years when the ban was still in full effect -- the company's sales nonetheless increased 50 percent. After the ban was lifted in 2005, when you'd expect to see pent-up demand result in strong sales, sales grew a mere 5.3 percent (before taking off again in 2006 and beyond).

The Upshot

None of the above should be taken as suggesting that gun regulation is good, or that guns are bad -- or vice versa. What it does suggest is that whatever laws come out of Congress in the next few weeks or months, so long as there's a demand for the product, gun companies will find a way to work within (or work around) the new legal regime.

Daily Finance Midday Market Minute 01/17/13


Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Sturm, Ruger & Company.

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55 Comments

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democrackso

PEGGY
Paranoid right wingers. Adult males, that more than likely have enough guns/ammo to last them a lifetime, but they "must get more guns"

+++++++++++++++++++++++++++++++++
Peggy I would put money on it that you will find more inner city Obama supporters with guns. Inner city Obama supporters love their guns and it's evident if you look at what's going on in Chicago that they love using them too.

January 21 2013 at 9:36 PM Report abuse +1 rate up rate down Reply
sharpsguy

911 average response time: 17 minutes. AR-15 bullet? 3200 feet per second. THAT'S response time when your life is in danger!

23 million LAW-ABIDING owners of AR-15 and AK-47 Semi Automatic rifles murdered NOBODY yesterday, not last week, not last year!

Register ALL Semi-Automatic firearms with "The Government?" Oh, sure. Even criminals will register theirs? Right. Old Adolph had the same idea. It worked for him, but not so much for Jews.

January 20 2013 at 3:43 PM Report abuse -3 rate up rate down Reply
1 reply to sharpsguy's comment
chris1011

The Hitler excuse is a lie anyhow. After Germany lost WW1 the alliesdrafted the Treaty of Versailles in which Germany had to give up all their weapons. And that included private guns held by German citizens. Guns were confiscated under the watch of the Allied forces (mainly French) and full gun control was implimented. When Hitler rose to power he threw out the treaty of Versailles, along with the restrictive gun laws. In fact he recommended that German citizens purchase guns and arm themselves, as they had done before the first world war.

Among the most radical right wingers were the Brown Shirts, who were Hitler supporters and true gun nuts. Their first task was to eliminate unions and liberals whom they called communists. Quite successful they were.

January 21 2013 at 7:59 PM Report abuse -2 rate up rate down Reply
nancybminzer

Clearly we need longer time limitations so that the local law enforcement, local physicians, , and FBI enfrocers
working together. Maybe 5 weeks. Maybe 6 weeks. This is an area where the budget needs to go up!
Secondly, in the 1960's we closed our state run Mental Institiutions except for Mental Institutions except for the
criminally insane. Maybe we need to place more more emphasis on Prevention and stoppage rather than
mourning.

January 19 2013 at 9:31 PM Report abuse -1 rate up rate down Reply
timothyknerr

I know several guns collectors and they aren't worried at all. Why because Obama isn't taking away any gun rights. Just assualt weapons, high capacity magazines and closing the loophole on background checks that aren't done at gun show sales. Nothing to be worried about, but go right ahead and get your panties in a bunch.

January 19 2013 at 12:22 AM Report abuse -2 rate up rate down Reply
Pllc15

Will we see another political movement that equally stirred the Tea Party movement against government spending and rising taxes coming to the forefront? The 2nd Amendment advocates against weapons' bans might be called the "Minute Men" movement supporting most likely the GOP's.

January 18 2013 at 11:14 PM Report abuse -2 rate up rate down Reply
lmayj

Yes Peggy I would like a tank....do they come in pretty colors?

January 18 2013 at 10:26 PM Report abuse rate up rate down Reply
lmayj

gee whizzy...I thought it was a "no brainer" you ban something and everyone will want it, even the ones who didnt want it before...look at how excited people got when they thought they would not be able to get another twinkie...they freaked out...

January 18 2013 at 10:14 PM Report abuse rate up rate down Reply
talari

Obama is has sold more guns than any man on earth!

January 18 2013 at 8:24 PM Report abuse +2 rate up rate down Reply
1 reply to talari's comment
chris1011

He's actually in bed with the gun manufacturers. They're having their best, most profitable year in decades. I'd be willing to bet that all of them contributed to his campaign. As long as he keeps tickling the gun people's noses, they will rush out and buy more iron and ammo. Must be his way of stimulating the economy without spending any taxpayer money.

January 21 2013 at 8:02 PM Report abuse rate up rate down Reply
wfm9020

how come this administration wants to take firearms out of its own citizens hands and put them in the hands of revolutionaries in the middle east?
there has been many times in this country,when a civilian had to take arms against tyrany,not just in the american revolution,ck your history book!

January 18 2013 at 7:15 PM Report abuse +1 rate up rate down Reply
1 reply to wfm9020's comment
lmayj

here in arizona we just flat out gave a bunch of high power guns to the mexicans and they came back and killed border patrol agents and others as thanks

January 18 2013 at 10:16 PM Report abuse +2 rate up rate down Reply
PEGGY

It's a sure bet, that these gun manufacturers are behind ALL the ranting/raving about weapons being taken away. Their laughing their heads off, about all the lunatics that own guns buying more.

AND, you can, also, bet, that the top people in the NRA are raking in the bucks. The bottom line.......they don't give a tinkers damn about lives. It's the money. Money, money and more money.

Why do you think Tom Sellack is not speaking out? He is on the board of the NRA. I WILL NOT WATCH SELLACK'S SERIES ON TV, HIS MOVIES OR PURCHASE ANY PRODUCE THAT IS ADVERTISED ON HIS SERIES.

January 18 2013 at 7:05 PM Report abuse -5 rate up rate down Reply
1 reply to PEGGY's comment
rrwinte

The NRA membership includes military, ex-military, and law enforcement in their ranks who have put their lives on the line to protect your safety and or freedom and you say they don't give a damn.

Shame on you.

January 18 2013 at 10:46 PM Report abuse rate up rate down Reply