Why Sturm, Ruger & Company Stock Fell 11.5% in 2016

By Steve Symington Markets Fool.com

IMAGE SOURCE: STURM, RUGER.

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What happened

Despite several strong quarterly reports, Sturm, Ruger & Company's(NYSE: RGR)sharesultimately fell 11.5% in 2016,according to data provided byS&P Global Market Intelligence, largely due to concerns surrounding the U.S. presidential election.

So what

The year started out well enough. After an initial slide in January along with the broader market, a strong quarterly report in February subsequently pushed Sturm, Ruger to its highest levels since early 2014. Then, thanks to the combination of another strong report in May -- fiscal first-quarter 2016 revenue had climbed 26% year over year, to $173.1 million, while net income per share grew 50%, to $1.21, both far better than Wall Street's expectations -- and fears of tighter gun regulations this past summer, Sturm, Ruger investors watched in delight as their stock climbed roughly 17% year to date through the end of July.

However, Sturm, Ruger stock subsequently plunged nearly 30% in the two days after Donald Trump pulled off a stunning victory in this year's U.S. presidential election.

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But the plunge shouldn't be a huge surprise, even if the more common drivers of gun sales are somewhat counterintuitive. In short, the president-elect largely shunned more stringent gun-control measures during his campaign -- a stance that generally creates a lull in firearms demand by easing the sense of urgency that causes many gun advocates to want to buy while they still can.

Now what

That doesn't mean companies like Sturm, Ruger can't thrive under Trump's presidency. As fellow Fool Rich Smith pointed out recently, Mr. Trump is also known for abruptly changing his policies, so we shouldn't rule out a possible shift in his approach to firearms over the next four years. And even then, gun-friendly policies aren't the only factor determining gun sales, so they aren't guaranteed to hurt demand over long-term time periods.

As it stands, investors will need to wait for more clarity on Sturm, Ruger's outlook when the company reports quarterly results next month. In the meantime, given the results of last year's election, it should be no surprise that Sturm, Ruger stock plunged to end 2016.

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Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.