Markets

Why Shares of Smith & Wesson Shot Higher Today

What happened

Shares of Smith & Wesson Brands (NASDAQ: SWBI) gained 8% on Monday and traded up more than 10% mid-day, following another strong month for the background checks needed to buy a firearm.

So what

The Federal Bureau of Investigation reported Monday that July checks performed by its National Instant Criminal Background Check System (NICS) rose 123% year over year, following a June 136% gain.

A handgun with bullets.

Image source: Getty Images.

Investors in firearm stocks went into 2020 expecting gains because sales typically spike ahead of presidential elections. But headlines concerning civil unrest and pandemic-related fears seem to be driving interest in firearms higher as well, creating increased demand.

Handgun interest came in especially strong. Those small guns make up nearly 80% of Smith & Wesson firearm sales, meaning the company should see substantial trickle-through benefits from the background data.

Now what

Shares of Smith & Wesson are now up 177% for the year, but the stock is still below where it traded in 2016. Given the frightening news headlines that have come out of 2020, and the prospects of tighter gun control in the future depending on the outlook for the U.S. election, I'd expect NICS data to continue to trend higher in the months to come.

SWBI Chart

SWBI data by YCharts

Firearms stocks come with a lot of baggage, and the industry tends to be highly cyclical. But for those who want to go along for the ride, it appears we are getting a strong election-year upcycle in 2020, and the momentum is not fading yet.

10 stocks we like better than Smith & Wesson Brands, Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Smith & Wesson Brands, Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of June 2, 2020

 

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

SWBI

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More