A Thematic Investing Perspective On Firearms

When we develop our investment themes at Tematica Research, we look at the intersection of economics, demographics, psychographics and technologies, mixed in with regulatory mandates and other forces.  Each of those factors has a varying level of influence on the equation at any given time and as we like to say, the landscape is constantly shifting.

Case in point, on February 6th, we posted a Thematic Signal about declining gun sales as the prospect of any type of gun control legislation had declined with the Republican party in control both the legislative and executive branches of government. Without that legislative pressure, the need for gun owners to purchase additional firearms “before it was too late” had eased off. After a record-breaking year in 2016 of checks made by the FBI’s National Instant Criminal Background Check System (a proxy for the number of gun sales), the number of checks in 2017 and into 2018 were in decline.

Well, the landscape shifted once again just eight days later when a gunman opened fire at Marjory Stoneman Douglas High School in Parkland, Florida. That tragedy has brought the heated debate over gun control legislation back front and center. We’re not going to dig into the political components of arguments around gun control legislation and 2nd Amendment Rights — we have our personal views on the matter, but this is simply not the forum. Firearms, however, are a key component to one of our investing themes — Safety & Security — and we are keeping close tabs on these developments and the impact they could have on firearms manufacturers such as American Outdoor Brands (AOBC) and Sturm, Ruger (RGR). And of course, the impact goes even deeper when we consider ammunition makers such Olin (OLN) and retailers like Walmart (WMT), Dicks Sporting Goods (DKS) and Cabelas (CAB) that sell firearms.

Yesterday, February 22, an interesting development came to light in this category when CNBC made the following report:

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Disclosure: None.

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