Are you concerned about your financial future? Or maybe you’re worried that the world just isn’t safe anymore…

If so, you’re not the only one. In fact, people across the country are feeding their fears by purchasing firearms…

Take Florida, for example. Floridians are applying for concealed weapons permits in record numbers — and the state government is buckling under the weight of a massive backlog of concealed weapons permits, according to the St. Petersburg Times. The state has even been forced to hire more than 60 temporary workers to deal with the flood of applications.

But it doesn’t seem as if law enforcement is interesting in quelling the panic. “Once the economy gets bad, crime always goes up,” a police officer told the St. Pete Times, “People get desperate whenever things are not going the way they feel like they should be going, and they’ll do things they normally wouldn’t do.”

Crime isn’t the only factor driving sales. In several news accounts, gun buyers have said they’re buying now because they fear stricter gun laws are inevitable under the new administration.

This gun craze is especially interesting since firearms have long occupied a relatively stagnant market space. Take rifle production, for example. From 1973-2005, the number of rifles produced each year decreased on average 3.8%. Shotgun production dropped on average 2.9% for the same period.

Revolvers have seen their production numbers dropping at an average of 4.6% a year. The only segment of the U.S. firearms industry that’s actually growing is pistols. Its growth is a 1.9% average each year. Not much to get excited about here…

However, sentiment is rapidly changing. And we think you should seriously consider firearms. No, we’re not advocating the purchase of guns… Instead, you should check out a couple of small-cap gun makers. These companies have withstood the test of time. Now, they’re enjoying more publicity and rising share prices…

First up is Smith & Wesson Holding Corp. (SWHC: NASDAQ). This company has been making guns longer than any of us have been on the planet. It’s also a trusted brand that has expanded its offerings over the past few years…

After a tumultuous few years, this stock has posted a strong 2009. Shares are up about 80% since Jan.1.

The gun maker has big plans. Smith & Wesson has moved into the rifle market and wants to take full advantage of this expansion. In February, the gun maker announced it plans to nearly double its annual revenue and improve margins and market share over the next few years.

Sturm, Ruger & Co. (RGR: NYSE) shares have enjoyed similar success this year. As of this morning, the stock is up more than 80%. The firearms makers reported huge increases in revenue and backlog during Q4, and several analysts have upgraded this stock to a strong buy.

Ruger stock might even be too hot to handle right now. It’s posted most of its gains in just a few weeks. Short-term technicals show this stock is way overbought, so it might be best to wait for a pullback before jumping in…

Best,
Greg Guenthner

March 6, 2009

Greg Guenthner

Greg Guenthner uses his experience as a former journalist to dig up the hard-to-find headlines that could lead to big gains for your micro-cap portfolio. Greg offers his readers the scoop on topics ranging from alternative energies to biotechnology, digging up the best penny stock opportunities before they’re discovered by the mainstream media. On top of contributing to Penny Sleuth, Greg also heads Penny Stock Fortunes and Bulletin Board Elite. Special Report: Imagine Getting Rich as Ignored Stocks Soar - You could turn $200 into $1.2 million!

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