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Gun shares surge as Clinton calls for restrictions

Hillary Clinton unveils gun control plan 31:06

Smith & Wesson Holding (SWHC) and Sturm Ruger (RGR) climbed after Hillary Clinton called for closing gun-sale loopholes and other restrictions.

The Democratic presidential candidate offered her proposals on Monday, days after a gunman killed nine people at a college in Oregon. Clinton has made gun control a standard part of her stump speech since nine congregants were shot to death at a church in Charleston, South Carolina.

"The number one driver of gun buying is fear. President Obama has been the best thing in the world for gun sales, and Hillary Clinton is just going to accelerate those fears," said Brian William Ruttenbur, an analyst at BB&T Capital Markets, referring to panic buying by people worried their access to firearms might be restricted in the future.

Another reason gun manufacturers are getting a boost is recently released data showing background check requests rose 23 percent in September, Ruttenbur said. "Actual gun sales should correlate to about roughly 5 percent year over year," he added of the monthly numbers from the Federal Bureau of Investigation.

Smith & Wesson's share price closed up 7.3 percent, at $17.81, after rising to a high of $17.94 during the session, while Sturm Ruger's rose nearly 3 percent, to $57.93, after hitting a session high of $58.62.

The trading activity follows a pattern that has occurred after mass shootings in recent years, with sales at both companies rising after politicians called for legislation curbing gun sales.

"That certainly happened it 2012, so it wouldn't be without a historical backdrop," said Art Hogan, chief market strategist at Wunderlich Securities, referring to President Obama's efforts to get federal legislation to curb gun sales after the murders of 20 children and six adults at an elementary school in Newtown, Connecticut. "After Newtown, Obama tried to put forth national gun control legislation, and people went out and stocked up."

That said, an underlying fundamental reason for Smith & Wesson's rise is investors thinking the gun manufacturer is a contender for a lucrative contract to supply guns to the U.S. military starting next year, Hogan said.

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