Gun stocks rise in hours after Las Vegas mass shooting

Gun stocks rise in hours after Las Vegas mass shooting”

Despite the stock's longer-term technical troubles - AOBC is down more than 44% since hitting an annual high on November 8, the day before the US presidential election - options traders today are betting on more upside for the shares.

Take a look at gun stocks' recent performance.

Almost 90 percent of Americans said they supported the bills introduced in the Senate last June that would limit gun sales to those on no-fly lists, expand background checks and block those with mental health issues or convicted felons from buying guns.

Even the discussion of potential new regulations can send gun consumers to stock up on items they fear could be outlawed or more heavily regulated. Among the names participating in the sector-wide surge are American Outdoor Brands Corp (NASDAQ:AOBC) and Sturm Ruger & Company Inc (NYSE:RGR), with both stocks now trading near key technical levels. It was reported that firearm manufacturers made $632 million in profits after the deadly mass shooting that happened at the Sandy Hook Elementary School in Newtown, Connecticut that killed 20 children and six adults in 2012.

The dynamic works something like this: Mass shootings inevitably lead to public calls for gun control. Investors, looking at the polls, figured that Hillary Clinton - an advocate of tougher rules against firearms - would win the White House. American Outdoor Brands has seen a double digit stock decline in the months since the presidential election. They projected a postelection surge of gun purchases.

Following the attack, the price of shares for firearm manufacturer, Sturm Ruger, was up more than 4.5 per cent Monday afternoon. Federal Bureau of Investigation background checks for firearms have fallen as well.

Ruger blamed reduced purchasing by retailers trying to scale back their inventories and "aggressive price discounting and lucrative consumer rebates" offered by competitors.

"We see an industry that, while beleaguered with excess inventory, elevated promotions and questionable manufacturer strategy, is showing no signs of going away", Wedbush analysts wrote in their report.

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