Although I hold no positions, I follow the stocks of publicly traded firearms and shooting sports companies, such as Sturm, Ruger & Company. (RGR), Vista Outdoor, Inc., and the recently renamed American Outdoor Brands Corp. (AOBC), formerly known by the venerable name, Smith & Wesson. I also keep an eye on the chemical company, Olin Corp. (OLN), which makes small arms ammunition, under the Winchester brand name.
To gauge firearms industry sales, company performance and stock price action, firearms industry observers and equity analysts follow monthly data from the National Criminal Instant Background Check System (NCIS), disclosed by the FBI. NCIS numbers track the number of federally mandated criminal background checks performed by licensed gun dealers, called Federal Firearms Licensees (FFLs). By law, all civilian purchasers of firearms must undergo an NCIS check to purchase a firearm legally.
NCIS figures have been rising at a healthy pace in recent years and have spiked upward in response to threats of tighter gun regulation, as well as incidents of terrorism, mass shootings, and violent crime. However, NCIS applications declined in January 2017; so have the stock prices of firearms manufacturers. To some extent, the price decline was predictable, due to the expected easing of anti-gun fervor under the new Trump Administration. Even so, I believe something else is going on.
Yes, NCIS numbers are important, but, with the possible exception of RGR, firearms companies are overtly positioning themselves as "outdoor" companies, not "firearms" companies. The end result is to compete for investor and analyst attention with a larger universe of publicly traded equities. Think Nike, Under Armor, VF Corp., not to mention makers of outdoor recreational vehicles, such as ATVs, snow mobiles, watercraft, and motorcycles.
Firearms companies that want to diversify into the outdoor market are going to have to get used to playing with the big boys.