Interesting Investments: Firearms

Avery-Taylor Phillips |


Investing is not for the faint of heart. We’re about to get pretty cynical, but it’s an interesting investment, so hang on tight.

As I write this, the United States is reeling from its most recent terror attack, in New York. Unlike most attacks on US soil, it wasn’t carried out by guns, but by a truck. But, within the past couple months, a shooting in Las Vegas saw scores dead and hundreds injured, and a shooting at a church in Texas led to 26 deaths, both incidents due to firearms. After any major gun related incident, legislators bring up gun control issues. Gun sales spike, and prices often go up to take advantage of the rush. Enter our next investment: guns.

Firearms as Collectibles

Some firearms are collectible — take the Winchester Model 21, shotgun that, much like other collectibles, has seen steady increases in value. A used Model 21 in 12-gauge can be found for about $3,500 if you are lucky. A 28-gauge version? Even more.

Some models are simply prized for their historical value. A Colt Single Action Army, the revolver you probably conjure in your mind when cowboys are mentioned, goes for well over $1,000, and even modern-day reproductions can approach that number. Engraved Colt SAAs, or original production pieces that are in excellent condition can fetch $2,500 at a bare minimum. Why? Simple — everyone loves cowboys.

Run on Guns

Before we address runs on guns, it’s important to note something: unlike cars, even used firearms hold their value remarkably well. While a current 4th Generation Glock 17 or 19 can be bought for a few hundred dollars, they will sell at about the same price if and when you decide to sell the firearm — at least until the 5th Generation, which is on the horizon, becomes available. Even then, you can expect only a minor loss. Compared to cars, where just driving off the lot equals a large decrease in value, even Glocks — a poor investment if you are only looking for a profit — still have some merit.

Bearing this in mind, guns will fly off shelves and likely spike in price after a major gun-related event such as the terrorist attacks in San Bernardino and Orlando, or or prior to legislation. Just before the assault rifle ban in 1994, AR-15s flew off the shelves. What would cost about $600 in 1993 suddenly jumped to at least $1,000 the following year. Magazines — the part that holds the bullets — doubled in price from $30 to $60 after the Sandy Hook Elementary School shooting. Prices did not go down until the ban was lifted in 2004. Now, a budget AR-15 can be built for $400, while higher-end ARs are still in the $1,000-plus range, and can go for far, far more. Competition rifles, which are made with the lightest of materials and are meant to be as accurate as possible, can go for $20,000.



The Election of 2016

A similar occurrence happened in the lead up to the 2016 election, with the assumption that, should Hillary Clinton win, she would enact laws limiting the availability of what the public commonly calls “assault rifles,” such as the AR-15. The FBI recorded a record number of background checks for firearms purchases. But, after the election, with pro-gun Donald Trump as president, NPR reported that sales fell. This, as the NPR article notes, was entirely due to people buying guns for self-defense. Competition shooters and hunters will still buy guns, regardless of who is president.

That same year, there were about 310 million firearms in the US, or 101.5 firearms per 100 people. Of those, about a third were rifles, and about a third of all households had at least one gun, with the average gun owner owing five guns. Of those, 60 percent said it was for protection.

What Should You Invest In?

With all that background out of the way, we now come to the million-dollar question: Which guns should you actually invest in? The answer is: whatever you like. Does it look like a solid gun? Is it in good or new condition? Does it still work? If so, buy it. Even if you don’t make money off it, you have a practical tool for hunting or protection, or even just a range toy to practice your aim on weekends.

Plus, sometimes, you’ll make money where you wouldn’t think it was possible. The Mosin-Nagant rifle has been a staple of the surplus industry since far more were made during World War II than were needed. During the war, some 13 million rifles were made — added to all those since the rifle’s original manufacturing in the late 1800s. Many were put in storage. Until just a couple years ago, Mosins could be bought for $80-120 at just about any pawn shop or gun store you cared to stroll into. Now, less than $200 is a steal.

In the firearms world, “rare” does not translate to “valuable.” Instead, guns in good condition and that have high desirability are worth the most. The key is to do your research. Play around with Google, look at local sellers, see what people are buying and why.

Selling Guns

A quick note on selling guns: If you sell only a couple guns in a year, you should be fine. But if you intend on making it a business, you will need a Federal Firearms License, or FFL. The standard dealer license requires a background check, inspection of the sales place, approval from your local chief of police or sheriff, and a payment of $200 to the Bureau of Alcohol, Tobacco, Firearms, and Explosives, or ATF. The ATF requires a renewal every three years at a cost of $90. There are other licenses, often cheaper, such as only selling curios and relics, or only importing, but chances are you will need the standard dealer’s license. If you only sell firearms at gun shows, you do not need an FFL.

Storage

Unlike many investments, guns can be dangerous if not handled correctly. It’s important to store any firearms unloaded and in a gun safe. Handling the gun in an unsafe manner while it's loaded could mean the bullet flies through multiple walls, potentially hurting your loved ones or neighbors — entirely possible with everything from handguns to rifles. That fairly expensive rifle could easily become extremely expensive after a personal injury lawsuit resulting from injuries you can cause someone through improper handling of a loaded weapon, negating any profit you might have made from a resale.

This is merely an overview. We haven’t delved into what are typically very expensive fully automatic weapons (which all require an FFL to sell, as they are controlled by the ATF) and items such as suppressors. If you are simply looking to buy a firearm and turn a profit in a few years, the best advice is to do research, and buy something that, if all else fails, is a firearm you like to use.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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