Are guns a good investment?

Posted at 7:20 AM, Aug 23, 2016

When it comes to the many different ways you can invest your money, investing in guns is probably not the first thing that pops into your mind. Firearms are usually bought for protection or sport. However, some people buy them as an investment, hoping that their value will increase over time. This has especially been true in recent years as talk of stricter gun control laws has picked up in the aftermath of several tragic mass shootings.

World's Greatest Gun Salesman?

People on both sides of the gun control issue quip that President Obama is a great gun salesman. This is because gun and ammunition sales have been on the rise ever since he was first elected, due to the fear among many gun enthusiasts that he would attempt to sharply restrict access to firearms.

According to a report published by the Bureau of Alcohol, Tobacco and Firearms (ATF), 26 million guns were produced during President Obama's first term in office. In comparison, 28 million guns were produced during George W. Bush's two terms in office combined. When it looked like assault rifles might be banned in 2013, sales of AK-47s and AR-15s took off, with inventory flying off the shelves.

Gun sales soared again when the terrorist attacks in San Bernardino, California, last December and Orlando, Florida, this June sparked further debates over gun control. One gun storeowner in Orlando said business was up 200-300% in the week after the early-morning Pulse massacre. The FBI processed a record 23.1 million firearm background checks in the U.S. in 2015, and 2016 is set to surpass that record, with 13.8 million checks already run by the end of June.

It is worth noting, however, that gun control laws generally have not been tightened during President Obama's term in office. In fact, they have been loosened in some states. With Republicans now in control of Congress, it appears unlikely that this will change any time soon, so investing in firearms based on anticipated changes in gun laws appears to be an unwise strategy right now.

Another way to invest in guns is to buy antique and collectible firearms in hopes that their value will continue to rise over time. Like any type of antique investing, though, it pays to be well-informed about the antique firearm market. When looking for antique guns to buy as an investment, it is usually better to stick with classic, well-respected firearm brands like Colt and Winchester, which tend to hold their value better.

Condition is also important when it comes to antique firearms — guns in their original packaging and/or that have never been fired tend to fetch the highest returns. If an antique gun was also owned by someone famous, its value can skyrocket. A small pistol that John Dillinger carried in his sock, for example, sold at auction for $95,600 in 2009, which was more than double its estimated value. This year, a Model 1886 Winchester rifle owned by U.S. Army Captain Henry Ware Lawton who captured Geronimo, sold for $1.2 million, the most expensive single gun ever bought at auction.

Buying Gun Stocks

Gun investors also have the option of buying shares in firearm manufacturers. Smith & Wesson Holding Company (SWHC) and Sturm & Ruger Co. (RGR) are two publicly traded firearm companies in which you might consider investing. The stocks of both companies have soared over the past six years.

Smith & Wesson's stock price has risen from around $4 per share in April of 2010 to around $29 per share this July. It traded over $16 per share last summer. Meanwhile, Sturm and Ruger's stock price has risen from around $13 per share to about $68 per share over the same period. However, this stock topped $80 per share in early 2014, so it is down from its peak.

The End of the World?

Finally, if you believe that the end of civilization as we know it is near and a Mad Max world is just around the corner, then you might consider firearms to be the best investment you could possibly make. In such an apocalyptic scenario, guns, ammunition, food and medicine will likely be the most valuable commodities.

Which makes us wonder: Where does the gang on The Walking Dead get all their guns and ammo? It seems like they never run out.

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