The hot action in the firearms stocks has disappeared more quickly than a rent-controlled apartment from the market on the Upper West Side. As an example, RGR has seen a steep run higher since the 2009 bear market lows. Since May, though, the selling volume in the stock has been substantial. As always, context is crucial, and when we see that type of selling volume after a multi-year momentum run it amounts to warning shots being fired. (Similar comments apply to the recent surge in sell volume in SWHC). Mind you, not fatal shots, per se. Bull runs are notorious for final, “max pain” legs higher to frustrate just about everyone involved who considers themselves pragmatic.
Nevertheless, I see better areas of the market with far more enticing volume patterns within the context of uptrends than the firearms stocks. Just as Buffett and Munger often do, these stocks belong in the “too hard, I’ll take a pass” pile.