12/18/2012 02:12 pm ET

Gun-Maker Stocks Crushed For Third Straight Day In Wake Of Newtown Shooting

Everybody's running away from the nation's gun makers after the Newtown Elementary School massacre, and investors are leading the way.

Shares of Sturm, Ruger & Co. Inc., the biggest publicly traded gun maker by market value, were down 8.5 percent on Tuesday, the worst day of a three-day selloff that began with Friday's shooting. Since that day, Ruger shares have lost nearly 16 percent of their value.

Shares of the only other publicly traded U.S. gun maker, Smith & Wesson Holding Corp., were down 10 percent on Tuesday. Since Friday, shares of Smith & Wesson have lost 18 percent.

The stock-price collapses follow the news that Cerberus Capital Management intends to sell its investment in Freedom Group, the company that manufactures the Bushmaster rifle implicated in the Newtown shooting. The Cerberus announcement came after major Cerberus investor California State Teachers' Retirement System said it was reconsidering its investment in light of the massacre, which left 27 people dead, including 20 small children.

Meanwhile, major gun retailer Dick's Sporting Goods Inc. announced plans to pull some guns from its shelves "out of respect" for the Newtown victims, while Walmart Stores pulled ads for the Bushmaster rifle.

The selloff in shares of Ruger and Smith & Wesson come at the end of what has been an otherwise sterling year for the gun makers. Ruger shares are still up 24 percent this year. Shares of Smith & Wesson are still up a whopping 78 percent, despite the recent selloff.

Though gun investors have long had to worry about tighter gun laws slowing down gun sales, other mass shootings in recent years have had little impact and in fact have led to temporary spikes in gun sales. Shares of both Ruger and Smith & Wesson actually rose after the shootings in Aurora, Colo., in July.

Not so with the Newtown massacre, suggesting investors are significantly worried about the future for guns.



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