My Take

Gun crime: 'sin' investors are not the real sinners

PUBLISHED : Tuesday, 01 September, 2015, 2:24am
UPDATED : Tuesday, 01 September, 2015, 2:24am

Between choosing an entitled right and saving lives, especially of children, most societies would choose the latter and give up the former. America, or at least its political class in Washington, may be an exception when it comes to gun rights, which always trump human life.

Despite a consistent majority of Americans favouring gun control, you have a consistent bipartisan majority in the US Congress resisting it. So much for representative government!

This national perversity leads to periodic profit-making opportunities for investors who don't mind dipping their funds in so-called sin stocks in the US such as gun makers and weapons manufacturers. Here is a phenomenon that's sadly often repeated. The share prices of gun makers and retailers usually go up, sometimes significantly, after a well-publicised piece of carnage. This correlates with an FBI report that finds gun sales usually go up after a particularly horrible shooting incident.

For example, after the killing of two TV journalists last Wednesday by a former colleague that has reignited the gun control debate, the stocks of two of America's leading gun makers have been on a tear. Smith & Wesson jumped from under US$16 on the day of the killing to slightly above US$18 last Friday while Sturm, Ruger & Company moved from above US$57 to almost US$62 during the same period. That's an average rise of more than 10 per cent over two days against last week's backdrop of wild stock market swings in the US and round the world.

Both stocks also had a tremendous bull run during the six-month and 12-month periods after the Sandy Hook elementary school massacre in December 2012, when 27 people, mostly children, were killed.

US retailers that sell lots of guns such as Dick's Sporting Goods and Cabela have outperformed the S&P 500 by almost two to one and three to one respectively in the last five years, which has been a great bull period for the index itself.

People often express outrage at "sin" investors. But their sin is at worst of a third or fourth order removed from the actual crime.

America, blame your corrupt politicians and paranoid gun lovers and their lobbyists.

Stocks don't kill people. Guns do, and people do.