Is the Gun Boom Over? FBI Data Snaps 19-Month Record Streak

By Rich Duprey Markets Fool.com

After 19 consecutive months of record-breaking numbers of background checks for gun buyers, December monthly data from the Federal Bureau of Investigation snapped the streak with fewer checks conducted than in the same month last year. This seems to confirm analyst suspicions that with the election of Donald Trump to the presidency and Republican control of both houses of Congress, the threat of gun control is virtually non-existent, thus ending the gun boom.

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They couldn't be more wrong.

Image source: Getty Images.

A blowout year

According to the FBI, it conducted 2.77 million firearm background checks in December, or almost 550,000 less than it performed in December 2015, a drop of 16% year-over-year. Even though the law enforcement agency had processed the single biggest day of checks on Black Friday, that failed to carry over to the rest of the quarter. The theory that manufacturers and retailers employed heavy discounting to lower inventory and drive big sales numbers looks like it has credence -- at least until you look closer.

American Outdoor Brands (NASDAQ: AOBC) said at the start of December the competition has been very promotional, and though it is typically more promotional itself in January, February, and March as the SHOT Show, the NRA Show, and other events come up, its balance sheet is so strong it can compete on price and steal share from rivals when necessary.

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Vista Outdoor (NYSE: VSTO), which sells rifles and shotguns as well as ammunition, said it intends to continue its strategy of "focused promotional incentives" to protect its market share,, and Sturm, Ruger (NYSE: RGR) is not immune either from the discounting that has been going on in the industry.

Data source: FBI. Chart by author.

December was still a record

When you look more closely at the actual numbers the FBI posted, you see right away that December was still a record month.

Background checks for the period were the third most for a December since the FBI began tracking the data back in the late 1990s. It was surpassed only by December 2012, when 2.78 million background checks were conducted and December 2015, when 3.31 million were performed.

What's especially notable about those two months was that they both experienced tragic incidents. Four years ago was the Sandy Hook school shooting, and last year was the San Bernardino, California, attacks. Dec. 2016 was still a record month, because it was the highest number of background checks performed without major news pushing the numbers higher. The next highest December was 2014, when 2.3 million checks were conducted, or 400,000 fewer than last month.

Also, while last month's numbers were lower year-over-year, they were still higher sequentially with an 8% increase over November. That is the seventh consecutive month of sequential gains, and though that is to be expected as the back half of the year tends to see more activity than the first half, particularly as you enter the Christmas shopping season, it also indicates that demand remains above average and is not experiencing any particularly steep drop off.

Image source: Pixabay.

Throughout 2016, and for the past few years, the gun of choice for buyers has been one designed for concealed carry and personal protection. While gun control legislation has sparked temporary runs on firearms, by and large, the real motivating factor has been a desire for self-defense.

An uptick in violent crime rates, isolated incidents of mass shootings, and FBI data showing exceptionally strong demand even when those factors are not present indicate the gun boom is not over.

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Rich Duprey 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.