Gun Stocks Are Muted in Early Trading

The share prices of gun and ammunition companies often rise after mass shootings, with investors anticipating a spike in sales ahead of calls for stricter gun laws. On Wednesday, the day after a deadly shooting at an elementary school in Uvalde, Texas, prices for major gun-related stocks rose after a subdued start.

Smith & Wesson and Vista Outdoor both increased about 7 percent, while Sturm Ruger gained more than 4 percent. The stock market overall was up about 1 percent.

“The gun industry has perverse incentives,” said Dru Stevenson, a professor at South Texas College of Law in Houston, “because sales and their stocks go up when there are events like this.”

Gun makers’ shares have also generally risen since President Biden’s election, as they typically do under Democratic administrations, when tougher gun control measures get more attention. “As a nation, we have to ask, when in God’s name are we going to stand up to the gun lobby?” Mr. Biden said on Tuesday, declaring that it was “time to turn this pain into action.”

In the immediate aftermath of the Uvalde shooting, the second-deadliest school shooting on record, Democratic lawmakers cleared the way to force votes on legislation that would strengthen background checks for gun purchasers, which have previously been blocked by Republicans. “We’ve been burned so many times before,” Senator Chuck Schumer of New York, the majority leader, said of previous attempts to negotiate a bipartisan compromise on gun safety laws, suggesting that this latest attempt will also face long odds.

The increase in gun-related stocks on Wednesday was a stronger reaction than the one that followed the attack at a Buffalo grocery store last week, when many of these companies’ shares initially went up but ended the day little changed in the first trading session after the shooting. After the 2012 attack in Newtown, Conn., the deadliest school shooting, many gun stocks fell in the days after.

“Stocks are going up because people think there is going to be a spike in gun sales, not because they think there will be new restrictions,” says Alex Barrio, the director of advocacy for gun violence prevention at the liberal-leaning Center for American Progress. “It’s a bet on fear.”

Gun sales have gone up sharply during the pandemic, setting new monthly records as some feared that the coronavirus outbreak could lead to civil unrest. That wasn’t necessarily a boon for some firearms companies, with Remington filing for bankruptcy in mid-2020 for a second time in two years, struggling to pay its debt and hefty legal fees. In February, the families of nine Sandy Hook school shooting victims settled a lawsuit for $73 million with Remington, which made the AR-15-style rifle used in the attack. It was one of the largest and most significant settlements to date, as federal immunity for gunmakers provides a strong shield from litigation.

Gun control advocates recently petitioned the Federal Trade Commission to investigate and regulate the firearms industry as it has done with the tobacco industry, accusing companies of deceptive advertising practices. The State of New Jersey is pursuing a lawsuit against Smith & Wesson for the way it markets its products, seeking the release of internal documents.

The rise of “socially responsible” investing has also put a spotlight on the gun industry. Major money managers like BlackRock and Vanguard hold gun stocks in many of their funds, mostly index funds that track the entire market or focus on smaller companies — such as gun makers like Smith & Wesson and Sturm Ruger. Sellers of guns and ammunition, like Walmart, Big 5 and other retailers, are even more common holdings in many broad-based mutual funds, index funds and pension funds.

After the mass shooting at a high school in Parkland, Fla., in 2018, Jon Hale, the director of sustainability research for the Americas at Sustainalytics, a unit of the investment research firm Morningstar, said that he heard from financial advisers who were “getting all kinds of calls from clients concerned about whether they have guns in their portfolios.” That interest, part of a general rise in attention for investing in funds with environmental, social and governance, or E.S.G., principles, has continued to grow, he said.

There are now many E.S.G.-based alternatives to popular index funds that screen out gun-related stocks with minimal effects on performance or costs, Mr. Hale said. Online tools like Gun Free Funds, run by the nonprofit foundation As You Sow, give information about gun stocks in funds that appear in many investors’ portfolios and retirement accounts.

“School shootings really grab people’s attention” in a way that perhaps other mass shootings don’t, Mr. Hale said. And with the Texas attack coming so soon after the Buffalo shooting, he expects that financial advisers will face another uptick in calls about gun stocks from clients. “Maybe they thought about it before,” he said, “and something like this happens and it reminds them again: I should check my investments.”

Stephen Gandel contributed reporting.