Would Clinton or Trump be better for gun stocks?

Although 2016 might not be shaping up as the best year for personal defense stocks, it hasn't been a bad one by any means. Shares of companies like Taser International(NASDAQ: TASR) are up 28% year to date, even after it gave back nearly a quarter of its recent gains, and Smith & Wesson Holding(NASDAQ: SWHC) stock is running over 20% higher than where it started the year.

But defense stocks have long seemed to be sensitive to political forces. As a case in point, gun owners have worried that President Barack Obama would promote legislation that would restrict the rights of people to lawfully own firearms. In the run up to his first election, those fears did seem to play a role in gun sales; FBI background checks of potential gun buyers spiked in the months before his inauguration.

Naturally, as President Obama's administration comes to an end, gun owners and investors alike are wondering -- what will the outcome of the 2016 election signal for these companies?

Gun Firearm Shoot Range Males Ear Protection Getty

Image source: Getty Images.

The red pill or the blue pill

Both Clinton and Trump have laid out their agenda on guns and given voters a fairly stark contrast in their approach. Clinton favors broader background checks into gun buyers, closing loopholes, and perhaps most controversially, holding gun manufacturers responsible for crimes committed with their weapons. While Trump advocates enforcing existing laws before enacting new ones, revamping the country's mental health system, and protecting gun owner rights to buy ammunition and magazines of their choice.

RELATED: The states with the strictest gun laws in America:

States with the toughest gun laws
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States with the toughest gun laws
National Rifle Association's (NRA) annual meetings and exhibits show in Louisville, Kentucky, May 21, 2016. (Reuters)

#24. West Virginia
Grade: D- 

West Virginia may rank low in terms of overall gun control, but in 2015 Democratic Gov. Earl Ray Tomblin vetoed a bill that would have allowed people to carry concealed weapons without a permit.

#23. Indiana
Grade: D-

The relatively lax firearm laws in Indiana have led some to link them to gun violence in Chicago.

#22. New Hampshire
Grade: D

New Hampshire requires handgun dealers to obtain a state license, but does not extend the rule to dealers of rifles and shotguns.

#21. Nebraska
Grade: D

Nebraska differs from many states in that it gives local jurisdictions some control over firearm regulations.

#20. Virginia
Grade: D

Following the Virginia Tech shooting in 2007, the state took greater measures to report mental health records and prohibit sales of firearms to any person who has been "adjudicated as a mental defective."

#19. Ohio
Grade: D

Ohio does not prohibit the sale of assault weapons nor limit the number of firearms that may be purchased at one time.

#18. Wisconsin
Grade: D

In a major blow to gun control advocates, Republican Gov. Scott Walker repealedthe state's mandatory 48-hour waiting period for handgun purchases in 2015.

#17. Iowa
Grade: C-

Iowa took steps to tighten gun control when it enacted child access preventionrequirements upon gun owners.

#16. Colorado
Grade: C-

While Colorado requires licensed firearms dealers to process background checks, it does not impose limits on the number of firearms that may be purchased at one time.

#15. Michigan
Grade: C

Michigan gun control laws require firearm owners to report handgun purchases and theft of any firearm.

#14. Oregon
Grade: C

Oregon greatly strengthened its firearm regulations in 2015 when it enacted laws requiring background checks for all firearm purchases.

#13. Pennsylvania
Grade: C

Compared to other solidly Democratic states, Pennsylvania's gun control laws are relatively lax, with no requirements for firearm owners to obtain licenses or register their weapons.

#12. Minnesota
Grade: C

Although federally licensed firearms dealers must initiate background checks, Minnesota does not require private sellers to do so.

#11. Washington
Grade: B-

Washington requires all firearm dealers to obtain a state license, but does not mandate that individuals register their weapons.

#10. Delaware
Grade: B

Delaware has relatively strict gun control measures, including mandatory background checks and purchase restrictions on domestic violence misdemeanants.

#9. Rhode Island
Grade: B+

Rhode Island may have comprehensive gun control measures overall, but it stilldoes not prohibit the transfer or possession of assault weapons.

#8. Illinois
Grade: B+

In addition to requiring background checks, Illinois has instituted some design safety standards for handguns.

#7. Hawaii
Grade: B+

In 2014, Hawaii had the lowest number of firearm-related deaths per 100K people. Gun regulation advocates have attributed this to its tight gun control measures.

#6. New York
Grade: A-

New York enacted major gun control reforms in 2013, including an expansion of the assault weapons ban and requirements for ammunition dealers to conduct background checks.

#5. Massachusetts
Grade: A-

Following the New York reforms, Massachusetts passed a comprehensive gun control bill in 2014 that increased firearm regulations.

#4. Maryland
Grade: A-

Among Maryland's firearm regulations are a ban on the transfer of certain assault weapons and a mandatory seven-day waiting period prior to the physical transfer of a firearm.

#3. New Jersey
Grade: A-

Republican Gov. Chris Christie may have shifted to the right on the issue of gun control, but his state still has some of the tightest firearm regulations in the country.

#2. Connecticut
Grade: A-

Connecticut's extensive gun control laws require firearms dealers to obtain a license and mandate background checks for all firearm sales at gun shows.

#1. California
Grade: A-

California takes the top spot as the state with the strictest gun control measures. Among the regulations in place are required background checks and limitations on the number of handguns an individual can purchase each month.


With a vacancy on the Supreme Court to be filled, however, the election winner may have more influence with their judicial appointee than any policy measures they plan to enact.

Woman Gun Range Control Shoot Eye Protection Handgun Firearm Target Safety Getty

Image source: Getty Images.

What does history say?

Looking back at how defense companies have performed with each party in power, the picture isn't entirely clear.

Sturm Ruger's (NYSE: RGR) history as a publicly traded stock goes back to 1969, so it's been through a few administrations of both parties, and while its stock gained some 67% (excluding the value of dividends) under the 41st president, George H.W. Bush, it lost 42% under his son, George W. Bush, the 43rd president.

A better bet may be to look at changes in the market cap of companies, which over time can smooth out the vagaries of stocks splits, share repurchases and the like. Doing so, we see over the last seven-plus years personal defense stocks performing quite well compared to the market as a whole.

TASR Market Cap Chart

Even Taser, which sells more into professional markets than to consumers, handily outpaced the S&P 500.

Breaking out the changes in market cap with the individual administrations gives a clearer picture of the situation. Ruger, with the longest history, has done well (and poorly) under both Democrats and Republicans.


Smith & Wesson has certainly done well during President Obama's years in office, but it had performed well under George W. Bush too, until the broader financial market collapsed.


In fact, it's easy to forget Obama was elected to office in the middle of a recession when stock values were severely depressed. His rhetoric and policies certainly played a role in the gun sales boom we've seen, but the performance of these companies may have been amplified simply by having been beaten so far down by the financial crisis.


President Obama's time in office has certainly been a strong one for all personal defense stocks, whether stun gun manufacturers or firearms makers, but it's not so clear-cut to say he necessarily deserves the nickname of "the greatest gun salesman in history." Further, investors shouldn't expect certain results from defense stocks based solely on the outcome of the election.

Many factors have come into play over the years, though presidential policies can determine the course of an industry. Yet as we've seen looking back over periods longer than just one administration, wide swings in value have occurred regardless of which political party is in office.

It might just mean that no matter whether Clinton or Trump wins the election, the outcome might not be as influential on this industry as one would think.

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