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The Journal Gazette

Wednesday, October 04, 2017 1:00 am

Gun stocks rise after attack

Up 5.7%; follows familiar pattern after mass shootings

STAN CHOE | Associated Press

NEW YORK – After a gunman killed more than 50 people in Las Vegas in the nation's latest mass shooting, stocks in the gun industry followed a familiar pattern. They rose.

Both Sturm, Ruger & Co. and American Outdoor Brands Corp., which owns Smith & Wesson, rose 5.7 percent over Monday and Tuesday.

Gun sales surged across the country in the weeks after past mass shootings, such as in Orlando, Florida, San Bernardino, California, or Newtown, Connecticut. Some of the purchases were likely by people looking for more protection, but others were due to customers worried that tougher gun laws could be on the way. That pushed them to buy before the window potentially closed. Investors who anticipated the run-up in sales bought shares of the gun makers, raising the price.

Many people might not even realize that these movements affect their investments. That's because many investors who never directly purchased shares of gun companies may nevertheless have them in their 401(k) accounts.

The biggest owners of American Outdoor Brands and Sturm Ruger are fund giants Vanguard and BlackRock. Together, the pair owns more than a quarter of Sturm Ruger's shares and 22 percent of American Outdoor Brands, according to FactSet.

The fund managers aren't necessarily keen on the gun industry or its prospects. They run huge index funds that own every stock in their respective index. So BlackRock's iShares Core S&P Small Cap ETF keeps about 0.1 percent of its money invested in Sturm Ruger, because that's how much of the index the company accounts for.

Vanguard's Total Stock Market Index fund similarly keeps a sliver of its investments in Sturm Ruger, but the immense popularity of index funds means those tiny percentages nevertheless add up to big dollars. Vanguard's Total Stock Market Index fund is the largest fund by assets and controls more than $600 billion, which means it owns about $21 million of Sturm Ruger stock. Many investors also own index funds without realizing it. More employers are automatically enrolling workers in the 401(k) account, and the default investment for many of them is an index fund or a target-date retirement fund made up of index funds.