The thematic investing approach we utilize at Tematica Research focuses on identifying sustainable market shifts that come about due to shifting economics, demographics, psychographics, technologies, mixed with regulatory mandates and other forces. This week, we see all of these factors wrapped up in our Safety & Security investment theme in a decline in gun sales, as reported by Bloomberg:
January gun sales slumped in comparison to past years, according to new data from the FBI’s National Instant Criminal Background Check System. The government doesn’t keep an exact count of firearms sold, but the system can be used as a proxy for sales and is considered an indicator for the industry. According to data kept by the agency, 2,030,530 firearm background checks were logged this January, down from 2,043,184 in the same month last year and 2,545,802 in 2016, which was a record year.When the background check numbers are adjusted for permit checks, such as concealed-carry applications, the results are more disappointing. (Analysts use the adjusted numbers to obtain a more specific snapshot of firearms industry sales.) “The January number again came in seasonally weak and represented another month of stack declines following last month’s drop off (-31.8% vs. -29.6% in December and +3.7% in November),” wrote Brett Andress, an equity research analyst at KeyBanc Capital Markets, in a report released Monday. “Further, today’s print is the lowest January check since 2012.” For Firearms, a Sales SlumpUnadjusted background check request data, a proxy for firearms sales, for the month of January.Source: FBI, NICS
Read Full Article: Why Are Gun Sales Falling? – Bloomberg
We see the underlying headwind to gun sales as being both political and emerging disruptive technologies. The political component is obvious — with the Republicans in control of both the Executive and Legislative branches of government, the likelihood of gun control legislation in the near future is very low. Thus, the pressure to stock-up on guns, which is one of the reasons for recent surges in gun sales, has diminished. How many guns does one really need?
Now, because the pressure to purchase guns doesn’t have the political tailwinds behind it, it doesn’t mean the tailwinds behind our Safety & Security investment theme aren’t still blowing strong. The defensive posture we see everywhere from governments to corporations to personal security is by all accounts unfortunately here to stay. As long as lone-wolf terrorist attacks, cyber-security attacks, and urban crime continue, the tailwinds behind the Safety & Security theme will blow strong.
But instead of purchasing a handgun for protecting your family and home, more and more individuals are turning to whole-house video surveillance, monitoring and security systems. These new systems, all wifi enabled and easy to install, provide at the very least the feeling of security if not a deterrent to criminals attempting to enter your home. Such systems are a key component of both our Disruptive Technologies investment theme and the Safety & Security theme, and the reason why we are seeing several companies, several of which are part of our Tematica Investing Select List, are quickly moving into the space.