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Guns and Investors

Mark Bateman - October 12, 2015

Second Amendment rights versus gun control.  This is one of the sharp dividing lines in American politics with no shortage of commentary on both sides.  Tragedies like the recent mass shooting in Roseburg, Oregon, draw out a new spate of commentaries, including comedy skits on Saturday Night Live.

But what do investments in guns look like?  There are only a handful of publicly traded U.S. companies that manufacture firearms for civilian markets:  Smith & Wesson (SWHC), Sturm, Ruger & Company (RGR), and Olin Corporation (OLN).  These companies represent approximately $5 billion in combined market capitalization.

In addition, there are retail stores that sell firearms.  Examples include: Dicks Sporting Goods (DKS), Big 5 Sporting Goods (BGFV), and Walmart (WMT).  For these companies, certainly, firearms are a minor revenue stream.

So where do firearms and firearms retailers make it into your clients portfolios?  ENSOGO Analytics’ analysis of mutual funds and ETFs shows that for large cap core/blend ETFs, the average fund has 1.77 percent of its investment weight in 1.87 companies that manufacture or sell civilian firearms or ammunition.  Large Cap Blend mutual funds have on average 1.27 percent of their weight invested in 2 companies.  As you can see, the total level of exposure is small.  Some of your investor clients may see it another way, that any exposure is too much and that funds should be able to avoid such small levels of exposure.

In a recent post, I cited a Gallop poll regarding gun control as one example of issues that may be of interest to some of your investors.  47 percent of Americans favor stricter gun control.

Where do you fall on this public policy question:  gun control advocate or defender of Second Amendment rights?   To what extent does that belief filter into your support of your clients?  If one of your clients asks whether she is invested in firearms, how are you going to answer her question?