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Investor Alert

Nov. 3, 2020, 3:32 p.m. EST

Gun stocks gain, suggesting a Trump loss may be anticipated

Tomi Kilgore

Shares of gun makers rallied on election day, which suggested investors may be anticipating a Biden victory.

A surge in firearm background checks by the Federal Bureau of Investigation this year, to already reach a full-year record in just nine months, also points to worries that tighter gun controls may be coming after the election.

Shares of Sturm, Ruger & Co. (NYS:RGR) ran up 3.5% in afternoon trading Tuesday, and Smith & Wesson Brands Inc. (NAS:SWBI) climbed 1.5%. Meanwhile, the S&P 500 index (S&P:SPX) rallied 1.6%. See Market Snapshot .

Ammunition and firearm accessories maker Vista Outdoor Inc.’s (NYS:VSTO) stock hiked up 1.3%.

“[G]enerally all of our contacts agree that the most positive outcome for gun sales would be a change in the White House, as historically an uptick in purchases under a Democratic president has outweighed any real risk of meaningful gun control measures,” Wedbush analyst James Hardiman wrote in a recent research note.

Former Vice President Joe Biden has had a clear lead over President Trump in national polls, with some oddsmakers putting the probability of a Biden victory at over 60%. PredictIt has it at 64% for a Biden win.

Don’t miss : Election Day dawns in U.S. as voters choose between Trump and Biden: live blog .

Also helping boost gun stocks, data from the FBI’s National Instant Criminal Background Check System showed that firearm background checks totaled 3.3 million in October , marking the sixth month this year checks topped the 3-million mark.

Before 2020, monthly checks had topped 3 million just once, in December 2015, since the FBI started providing the data in November 1998.

Year-to-date total checks has reached 32.1 million as of Oct. 31. Yearly checks had already reached a record of 28.8 million through September, breaking the previous record of 28.4 million reached in all of 2019.

The political environment isn’t the only thing providing incentive for gun buying this year. In Strum, Ruger Chief Executive John Killoy said last week in the post-earnings conference call with analysts that calls to defund the police and worries about social unrest stemming from the COVID-19 pandemic also fueled demand.

“The surge in consumer demand likely continues to be driven by the call, by some, for the reduction in funding and authority of law enforcement organizations, protests, demonstrations and civil unrest in many cities throughout the United States, and concerns about personal protection and home defense stemming from the continuing COVID-19 pandemic,” Killoy said, according to a FactSet transcript.

Also read : Gun maker Sturm Ruger details increased demand for firearms as COVID-19 spread in U.S .

Sturm, Ruger’s stock has soared 48.8% year to date, Smith & Wesson shares have rocketed 146.4% and Vista Outdoor’s stock has jumped 179.8%. Meanwhile, the S&P 500 has edged up 4.1% this year.

Link to MarketWatch's Slice.