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It's Time to Buy a Gun

By Jeff Clark
Tuesday, January 26, 2010

"Holy crap!" My wife screamed as she squeezed the trigger of the .38 caliber handgun. The force of the blast pushed her arms skyward.
 
An instant later, the bullet sliced through her target, splitting its head in two. Each half flapped back and forth in the jet-wash breeze of the titanium shot.
 
"Nice shot, ma'am," said the head-phoned, bearded shooting-range attendant.
 
My wife grinned proudly. "I'll take this one," she said.
 
I walked over to her and kissed her on the forehead. "Merry Christmas," I said and handed her an application for a gun permit. Forget the diamond earrings. Forget the little blue Tiffany boxes filled with tiny, overpriced trinkets. This year, my wife asked Santa to put a gun under the tree.
 
"But why do you want a gun?" I asked when the subject came up last Thanksgiving.
 
"I don't know," she shrugged. "I guess with everything going on in the world these days, I'd like to get a gun before they're outlawed completely."
 
My wife certainly isn't alone in that sentiment. As a local gun dealer explained to me, "The biggest boost to sales always happens when the government proposes some new law to restrict gun ownership."
 
It was fear of new gun-control laws that caused firearm sales to skyrocket immediately following President Obama's election. As of October 2009, FBI background checks on firearm sales – a leading indicator for the trend of firearm sales themselves – are up more than 18% over the same 10-month period in 2008.
 
But good times for gunmakers are almost always temporary. The boost in sales caused by political uncertainty never lasts more than a few months. That's a big reason why gunmaker stocks – despite achieving high double-digit sales growth – haven't really participated in the market rally over the past year. Stocks in the sector trade, on average, for only seven times earnings and 0.7 times sales.
 
However, there's something different happening this time. In the 22 years I've known my wife, not once, ever, has she even considered owning a gun... until now.
 
Let's face it, our world is vastly different today than it was a few short years ago. We've given up countless freedoms in the name of "national security." The lazy members of our society demand "More! More!" while hard-working and industrious people are forced, through confiscatory tax rates, to weave an even larger portion of the social safety net.
 
Government grows ever larger like a leech engorging on its host, while the individual and his right to privacy shrink.
 
There's a growing trend toward survivalism. There's a genuine fear – among people who ought not have any cause for concern – that what they have and what they've earned can be taken away from them.
 
That's why people are buying gold. That's why they're stocking up on ammunition. That's why my wife wanted a gun for Christmas. And that's why shares of gun manufacturers may be the best bargains in the stock market right now.
 
The stocks haven't rallied with the market, so they won't give up much if a significant correction takes hold. They're fundamentally cheap. The companies have strong balance sheets with plenty of cash on hand. And gun sales are increasing during a time in which sales of nearly everything else are falling.
 
I recently told my Advanced Income subscribers about a covered-call strategy on a gun stock that offered a 7% immediate return and the potential for 26% gains over the next six months. It's one of the lowest-risk trades in the market right now.
 
For more information on Advanced Income, click here.
 
Best regards and good trading,
 
Jeff Clark




In The Daily Crux
Market Notes
Traders bet big on market selloff... VIX call-option volume surges to 19-month high.
 
Major pipeline rally... Enterprise, Cheniere, Williams, Duncan, and other MLPs hit fresh highs.
 
Concert giant is born... Live Nation and Ticketmaster spike 10% on news regulators will OK merger.
 
Earnings today... Corning, DuPont, Johnson & Johnson, Jacobs Engineering, Verizon, U.S. Steel, Yahoo.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%

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