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If you're concerned about gun stock exposure, Morningstar has released a new report to help you determine whether your investments are linked to these companies, along with tips on what actions you can take. (Also, check out our comprehensive article on divesting.)
To minimize exposure, avoid stocks of American Outdoor Brands (AOBC), Sturm Ruger (RGR), and Vista Outdoor (VSTO), all of which produce various versions of the AR-15, according to the report. Here are three key questions to ask about your portfolio to help with this.
Do You Hold Small-Cap Stocks?
If your mutual fund contains small-cap stocks, you could be exposed to gun manufacturers: Morningstar reports that all publicly traded gun companies are classified as small-cap stocks.
The report reveals that "roughly two-thirds of the money invested in small-cap funds is exposed to gun stocks," spread across 264 different funds. Among major arms manufacturers, "American Outdoor Brands is included in 197 funds, Sturm Ruger in 252, and Vista Outdoor in 234," according to the findings.
Funds that are free from gun stock exposure tend to be actively managed.
Do You Hold Small-Cap Stocks Through an Index Fund?
"If your small-cap investments are through an index fund, you're likely invested in at least one of the gun manufacturers, and possibly all three, depending on the index your fund tracks," the report states.
The report also includes data on funds with gun stock exposure. Exhibit 1 highlights "the gun stock holdings of total-market and extended-market indexes with assets exceeding $1 billion."
Exhibit 2 displays "the gun stock exposures of small-cap index funds with assets greater than $1 billion."
Do You Hold an Actively Managed Small-Cap Fund?
If your funds are actively managed and contain small-cap stocks, you are less likely to be invested in gun stocks, and the only sure way to avoid such investments is through actively managed funds. "This is because actively managed funds hold fewer stocks than index funds, with each manager selecting stocks they believe will outperform the market," the report states. "With thousands of small companies available, only a few managers will choose any gun stocks for their portfolios."
You can consult this list to check if your fund holds gun stocks. Here are some funds not invested in gun-related companies:
However, divesting from gun stocks is unlikely to influence the behavior of these companies. "Given the minimal effect on investment returns, most index fund investors can feel secure knowing they aren’t significantly invested in gun stocks," the report mentions. But if this is important to you, it is still possible to make changes.
