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Why Is the Market Ignoring the Fact That Gun Sales Are Booming?

Why Is the Market Ignoring the Fact That Gun Sales Are Booming?


Just because gun sales aren't booming at the same rate they were during the biggest year ever for firearms manufacturers, that doesn't mean they're not still rising. Yet the way the market responded to the FBI release of April gun buyer background-check data, you'd think we were in the midst of a major downturn.

The fact is, gun sales are surging, and when American Outdoor Brands (NASDAQ:AOBC) and Sturm, Ruger (NYSE:RGR) report earnings for the current quarter, it's likely Wall Street will respond with shock and surprise at how strong demand was.

A woman takes target practice at a gun range.

Boom times

The federal law-enforcement agency says it processed more than 2 million background checks through its National Instant Criminal Background Check System in April, some 16% lower than it did in March and down 5% from the year-ago period. At first glance, it seems reasonable to say the market was right to drop the stocks of Smith & Wesson's owner and Ruger. But taking superficial readings leads to the wrong conclusion, as it has in this instance.

As noted, 2016 was the biggest year for gun sales. The FBI processed more than 27.5 million background checks last year, 19% more than it had the year before and more than double the number it did a decade ago.

Continued: https://www.fool.com/investing/2017/05/10/why-is-the-market-ignoring-the-fact-that-gun-sales.aspx