Tuesday, March 03, 2009

Recession Proof Stocks: Gun Makers and Cabela’s?

It seems that the recession might breed lawlessness and people are afraid that Obama might take away their guns right before people need them according to this.

The recent earnings report of handgun maker Sturm Ruger (RGR) suggests this is a national trend: Over the last year, the company saw its order book grow by almost 50%, from $156 million to over $233 million. Demand is hot: Out of the 776,000 units ordered, Sturm Ruger reported over 175,000 of them were on backorder.

Sturm Ruger’s stock, though incredibly volatile, is near its 52-week high (but still sharply lower than it was 2 years ago). Smith & Wesson (SWHC) has also seen its stock
rise, as speculative fervor has built on the apocalyptic scenario.

Even Cabela’s (CAB), the outdoor-sports-and-equipment retailer, recently defied Wall Street expectations on the force of strong firearm and ammunition sales; its same-store sales rose 2.2% in the quarter. (It would be interesting to see if its camouflage gear was also in high demand.)

So handgun sales are starting really take off as people are trying to front-run the Obama administration. However these stocks will seriously tank once Obama introduces the Dedicated Initiative for Safe Ammunition Repair and Maintenance (DISARM) act that bans all gun purchases except by "commercial hunters" (who have to pay $1000 a year for a permit and be subjected to a psychological screening, a background check, a drug test, and a yearly audit) and imposes 500% "safety fee" on all ammo purchases.

It will be slipped into the 10,470 page $15.7 Billion Stimulus Bill 2 that Obama will stump for by actually wearing a Grim Reaper costume. He will talk about the Bill in an ominous baritone while shining a flashlight under his face. He will periodically shout if you don't pass this we are "Doomed, Doooomed, DOOOOMED!"

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