A Gun-ETF? Don’t Shoot the Messenger..


Editor Note: MarketsMuse strongly advocates President Obama’s recently-proposed gun control legislation. The following article is consistent with our focus to remain fair and unbalanced while re-distributing relevant, 3rd party news stories impacting the ETF and options marketplaces.

They say that there is an exchange traded fund for just about every investment strategy out there. So how about a “pure gun” ETF? There are aerospace and defense ETFs, but not an ETF geared mostly around guns, bullets, and accessories for them. This may seem silly on the surface, going into efforts from the White House and legislation for stricter gun control and an assault weapons ban. If not an ETF, what about a closed-end fund? In all seriousness, this investment strategy could have some merit, regardless of how gun control plays out.

For starters, a Wall Street Journal poll showed that President Obama’s efforts (or Vice President Biden’s efforts) face a very tough road ahead in Congress. What if no ban at all passes through the House and Senate? Many democrats are said to be mixed on this issue, and Republicans are generally (and arguably) considered to oppose gun control efforts.

One thing that really stands out is that this is not formally gun control, at least that is how to think of it if you only listen to words rather than interpreting words and phrases. After all, Obama and Biden are more than careful in avoiding the phrase “gun control” in each and every speech and each and every statement. That is called spin, and is really no different from avoiding the term “global warming” in favor of the newer term “climate change.”

So what would a pure gun ETF actually look like? For starters, the stock ticker GUN is not taken. Other possible tickers that are not taken include NRA, SHOT, MOW, RIFL, ARAK, AKAR, KILL, SEMI and SNYP. There are three aerospace and defense sector ETFs: PowerShares Aerospace & Defense (NYSEMKT: PPA), iShares Dow Jones U.S. Aerospace & Defense (NYSEMKT: ITA) and SPDR S&P Aerospace & Defense (NYSEMKT: XAR). This might sound a lot like being close enough to a gun ETF, but if you review the top 10 holdings of each ETF there are literally no companies that are deemed to be mostly “gun” companies.

Smith & Wesson Holding Corp. (NASDAQ: SWHC) is a pure-play gun stock. It was founded in 1852 and its brands and products are known as Smith & Wesson, the M&P, the Thompson/Center and Walther. Its fiscal 2012 sales were $412 million and net income from operations was $44.9 million, with a final net income of $16.1 million.

Sturm, Ruger & Co. Inc. (NYSE: RGR) was founded in 1948 and is based in Southport, Connecticut. This is another pure play in the gun industry with the Ruger name. Fiscal sales were almost $329 million in 2011, with income from operations and net income of $40 million.