Look at These Gun Sales SURGE Before the Election

Americans appear to be arming up for the election in November. Shares of gun makers Smith & Wesson (NASDAQ:SWHC) and Sturm Ruger (NYSE:RGR) are up 134 percent and 41 percent respectively for the year to date.

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Riding this success, Smith & Wesson is expecting between $530 and $540 million in sales for fiscal year 2013. Analysts aren’t as optimistic, predicting average revenue of $498.2 million.

KeyBanc Capital Markets (NYSE:KEY) downgraded the two companies, claiming that the pace of growth is unsustainable. Analyst Scott Hamann wrote, “We believe the firearms industry is rapidly approaching levels of potentially peak profitability and could be at risk to some decline in these metrics if overall sales were to moderate.” Pullback from the rapid growth could ultimately hurt the stock. Hamann downgraded Smith & Wesson to “hold” from “buy” and Sturm Ruger to “underweight” from “hold.” Though the stocks took a slight hit on this news, growth remains strong.

Gun policy is not as big of an issue this year as it has been in the past, but fear of Democratic regulation could be spurring this recent surge. Smith & Wesson saw a monumental surge in share prices in July and August of 2007, which then free fell in November. Sturm Ruger had a similar though less pronounced rise and fall.

Although it’s too late now to buy in at the low, another four years could provide savvy investors a good opportunity to surf a pre-election gun sales bubble.

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