Civil Unrest Response of the National Guard Signals Stocks to Buy

Paul Dykewicz

Civil unrest response of the National Guard signals stocks to buy well before economic and corporate data becomes available to analyze.

Major civil unrest response of the National Guard can serve as an indicator not only of what stocks to buy or to sell, but what emergencies are occurring that could kill or injure people, cause major property damage and force the closing of businesses. All those hazards befell cities across America this year and could result in insured losses of $1-$2 billion. 

These losses, while severe, would not have an impact on the financial stability of the risk-underwriting industry, according to the Insurance Information Institute. However, the financial fallout is estimated to exceed $500 million in Minneapolis, where a police officer who was arresting 46-year-old African American George Floyd kneeled on his neck for 8 minutes and 46 seconds until the suspect died on May 25.

Activation of 43,000-Plus National Guardsman in June Signaled Stocks to Buy

As civil unrest spread nationwide and spiked in early June, 43,000-plus National Guard members deployed in 34 states and the District of Colombia to help local law enforcement restore and preserve peace. Since then, activated National Guard troops have fallen 92.56% to 3,200 in 10 states.

The main role of the Department of Defense (DoD) in supporting domestic law enforcement occurs through the National Guard, said Lt. Col. Chris Mitchell, a DOD spokesman. Each state’s National Guard can assist local and state authorities if ordered by its governor, he added.

“Additionally, should the need outstrip a state’s ability to provide the necessary numbers, governors can reach out to the governors of other states for additional assistance,” Lt. Col. Mitchell said.

Civil Unrest Response of the National Guard Spurs Creation of Special Units 

In search of ways to improve how the National Guard can identify best practices and lessons learned from the recent activations, the DoD is engaged in a review, as commonly is done after most military operations.

As governors across the nation continue to request support for law enforcement, a National Guard Response Task Force was created to provide Military Police units capable of responding within two hours. The specially trained and qualified teams will cover east and west regions from their bases in Alabama and Arizona, respectively.

“When people see the National Guard, they know we’re here to help,” said Army Gen. Daniel Hokanson, National Guard Bureau chief. “Our goal is to protect the people and property in the communities where we live and serve. This task force will allow us to do so with more speed and efficiency.”

The task force will be available to governors through the end of 2020, with about 600 troops – 300 in both Alabama and Arizona — ready to deploy within 24 hours if requested by a governor in another state, a DoD spokesman said. Additionally, the National Guard has purchased more than $200,000 in new protective equipment and increased troop training on proper procedures for dealing with protests, he added.

Delays in Civil Unrest Response of the National Guard Can Be Costly

The 2020 rioting that erupted in late May and continued into June differed from historical U.S. riot-and-civil-disorder events in many ways, said Tom Johansmeyer, head of Verisk Analytics’ Property Claim Services (PCS).

It marked the first PCS-designated riot catastrophe to involve more than one state, Johansmeyer said. PCS ultimately included more than 20 states in its catastrophe bulletin.

“This is truly unprecedented,” Johansmeyer said. “Additionally, scale is important. This event is one of the largest riot-and-civil-disorder events on record.”

Factors that made this year’s event unique include its impact on several large retailers, quick service restaurants and other consumer-focused businesses that sustained physical damage and may have business interruption claims. PCS has identified several large retailers that already have notified their insurers of a combined $200 million in losses on limits of approximately $1 billion.

“In a review of potential large risk losses from the riot for the PCS Global Large Loss platform, we have identified more than half a dozen companies to monitor for potential losses of at least $250 million,” Johansmeyer said. “We’ve already noted more than $3 billion in such programs exposed to the riots — in addition to the conventional catastrophe losses PCS is reviewing.”

Civil Unrest Response of the National Guard in Minnesota Led to Full Mobilization

Minnesota Gov. Tim Walz’s May 30 call for the full mobilization of the Minnesota National Guard marked the first time in its 164-year history such an order came to quell violent civil disturbances in the Twin Cities of Minneapolis and St. Paul. The out-of-control rioting, looting and destruction damaged more than 1,500 retail locations in the Twin Cities within several days.

An O’Reilly Auto Parts manager witnessed the destruction of his store just minutes after locking up when rioters descended on the South Minneapolis neighborhood and targeted his employer’s business as one of the first to attack after George Floyd’s death. Just days later, the auto store manager wore his National Guard uniform when he was activated to help local law enforcement keep the peace in the same neighborhood where his business and others were looted and burned.

Pfc. David Sanchez (shown in the photo above) and his O’Reilly Auto Parts colleagues were transferred to another location in Minneapolis after rioters destroyed their store.

O’Reilly Auto Parts leased the store at 710 East Lake Street in South Minneapolis that rioters destroyed, and that location will not reopen due to the extensive damage, said Mark Merz, the company’s vice president of investor relations, reporting and planning.

“When we experience events where stores are damaged and we are unable to serve our customers from that location, we transfer the operations to other stores in the market, thereby ensuring our customers are taken care of and our team members are provided for,” Merz said.

O’Reilly Auto Parts is a “very financially strong company” and has sufficient insurance reserves and third-party insurance coverage to mitigate the material impacts of these types of events, Merz concluded.

Civil Unrest Response of the National Guard Occurred in Many Locations

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Floyd’s death not only led to protests in Minneapolis but in the victim’s hometown of Houston, as well as New York, Washington, D.C., and other major cities in the United States and internationally. Although some protests stayed mostly peaceful, others turned violent and involved attacks on police and law-abiding citizens, destruction of potentially hundreds of millions of dollars in property, looting, shooting and murders.

Police shot and killed Breonna Taylor, a 26-year-old African-American woman, during a botched raid of her Louisville, Kentucky, apartment on March 13, 2020, triggering protests in that city and others during the spring and summer as the judicial process unfolded. Civil unrest in Louisville led to the recent activation of the Kentucky National Guard to help local law enforcement, said Major Stephen Martin, the state National Guard’s public affairs officer.

Lt. Col. Brian L. Mason, public affairs officer of the Arkansas National Guard, said soldiers and airmen assisted Arkansas State Police with their responsibilities to protect life and property and to allow citizens to peacefully assemble. Supporting civilian law enforcement, at the request of governors, is one of many value-added services provided by the National Guard to state, local and federal authorities, he added.

Civil Unrest Response of the National Guard Provided by Community Members

“Our Guardsmen come from and often live in the communities they serve,” Lt. Col. Mason said. “When people see a Guardsman, a neighbor, they know that we are there to help.”

Arkansas National Guard soldiers and airmen, as a matter of policy, are armed with sidearms — M9, 9mm pistol — for self-protection, Lt. Col. Martin said. They are also provided with standard riot-control gear that includes helmets, face-shields, flak vests, shields and batons.

Historic St. John’s Episcopal Church, known as the “church of presidents” in Washington, D.C., became a flashpoint during weeks of civil unrest sparked by the death of George Floyd. Protestors spray painted graffiti, including the initials “BLM” for Black Lives Matter and “BHAZ,” apparently for Seattle’s “Black House Autonomous Zone,” on the 204-year-old church and its columns. A nursery inside also was set on fire and damaged, along with children’s toys, amid protests on May 31. 

Civil Unrest Response of the National Guard Leads to Whistleblower Testimony

President Trump received heavy criticism for having law enforcement clear the plaza between St. John’s Church and Lafayette Park a block from the White House that was filled with people protesting police brutality on June 1. Federal police reportedly used tear gas to help move the protestors out of that area about a half hour before a 7 p.m. curfew that had been ordered by District of Columbia Mayor Muriel Bowser. President Trump, carrying a bible, and members of his administration walked from the White House to the church in the then-secured area. While in front of the church and holding the bible, the president posed for photos before walking back to the White House a short time later.

Major Adam DeMarco, a senior officer in the D.C. National Guard, filed a whistleblower complaint in the following days to report the required warnings conveyed with a megaphone near the statue of President Jackson about 50 yards from an estimated 2,000 protestors could not be heard well from his location about 20 yards from the demonstrators. The announcements were barely audible, and the protestors did not seem “cognizant” of the warnings to disperse,” Major DeMarco testified on July 28 before the House Committee on Natural Resources.

”At approximately 6:30 pm, the Park Police began the clearing operation, led by Civil Disturbance Units and horse-mounted officers,” DeMarco testified. “The Secret Service, and other law enforcement agencies I was unable to identify, also participated in the push. No National Guard personnel participated in the push or engaged in any other use of force against the demonstrators.”

Civil Unrest Response in Seattle Led to Deaths Without Police, National Guard 

The BHAZ acronym appeared to be a variation on the Capitol Hill Autonomous Zone in Seattle, Washington, that later became known as the Capitol Hill Organized Protest (CHOP), comprised of several blocks that protestors took over and police abandoned with the consent of the city’s mayor on June 8. Without police in that area, six people were shot and two died from their wounds during the next several weeks, amid reports of sexual assaults and other crimes. When that social experiment unraveled, Seattle Mayor Jenny Durkan ordered the dismantling of the autonomous CHOP zone.

Calls for “defunding police” in major cities across the country came into question after protests turned violent in places such as Seattle, Washington, Portland, Oregon, and Kenosha, Wisconsin, when local law enforcement appeared to be overwhelmed and outnumbered. Even though those protests centered on overly aggressive policing, especially against minorities, people in those communities died when the civil unrest escalated into chaos without sufficient peacekeeping.

Media mogul Steve Forbes, a former presidential candidate, cited Seattle and its recent civil unrest in a podcast posted on Friday, Oct. 2. 

“Before COVID and the recent riots, Seattle was a thriving and fast-growing area,” Forbes said. “Was it because residents decided years ago to max out their credit cards and go on a spending binge? Obviously, not. It was the extraordinary expansion of companies like Amazon, Microsoft, Boeing, Costco and Starbucks that fueled this amazing boom.” 

States’ Civil Unrest Response of the National Guard Signals Stocks to Buy

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Among the states that have activated National Guard members to support local law enforcement in controlling civil unrest and serving beyond its borders at the request of governors elsewhere is Arizona. It members offered civil support to assist with traffic control, to provide security and to escort emergency personnel and equipment, to offer a show of force, to transport local law enforcement personnel, to disperse crowds, to escort and protect very important people and to conduct other missions.

Service members are trained to use standard protective equipment in responding to civil disturbance, as well as to use the minimum level of force to protect themselves, others and property.

Just west of Arizona in neighboring Nevada, two small groups were called up for civil response, said Lt. Col. Mickey Kirschenbaum, public affairs officer for the Nevada National Guard.

“In Reno, we did have a small team of 20 soldiers who were activated for protection of facilities and critical infrastructure only,” Lt. Col. Kirschenbaum said.

Protestors set a small fire to City Hall before the National Guard arrived, Lt. Col. Kirschenbaum continued. Damage also occurred to the police headquarters near downtown Reno, he added.

Members of the Nevada National Guard also protected facilities and critical infrastructure in Las Vegas for a week in early June.

Investment Guru Sees National Guard COVID-19 Crisis Response Signaling Stock Purchase

Jim Woods, a firearms expert and former U.S. Army commando who later served in the National Guard, said he likes ammunition maker AMMO, Inc. (OTCMKTS:POWW), of Scottsdale, Arizona.

Paul Dykewicz discusses stocks with Jim Woods before COVID-19 strikes.

“In a testament to just how much demand there is for AMMO, Inc. products, the company has just released preliminary fiscal Q2 2021 earnings results that anticipate revenue in the quarter to increase by 306% year over year to approximately $12.0 million,” said Jim Woods, editor of the Successful Investing and Intelligence Report investment newsletters, as well as head of the Bullseye Stock Trader advisory service. “The makers of the patented Streak non-incendiary visual ammunition rounds also said they expect fiscal 2021 revenue to come in at $51 million.”

“During the fiscal second quarter, we continued to expand our production capabilities in a robust commercial demand environment,” said Fred Wagenhals, AMMO’s chairman and CEO, in a statement released Monday, Oct. 5. “We have booked a record number of orders across our commercial, export, military and law enforcement channels, and our manufacturing facilities are operating at near-full capacity.”

Chart courtesy of www.stockcharts.com

Woods opined that AMMO’s Streak ammunition is a “true innovation” in visual ammunition technology that gun enthusiasts have wanted for a long time.

Jim Woods tests AMMO, Inc.’s Streak non-incendiary visual ammunition near the company’s headquarters.

Civil Unrest Response of the National Guard Alerts Pension Fund Leader

Bob Carlson, head of the Retirement Watch investment newsletter and chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets, said, “I‘d go with a company that’s a little downstream from the gun and ammo manufacturers and also benefits from selling accessories.”

Carlson counseled that investors should consider Sportsman’s Warehouse Holdings (NASDAQ:SPWH) as possibly the only major retailer left that will sell guns and ammunition, since Wal-Mart (NYSE:WMT) and Dick’s Sporting Goods (NYSE:DKS) stopped doing so. About half the company’s sales are from guns and related accessories, Carlson added.

“It’s opening new stores and reduced debt last spring,” Carlson said. “The stock tumbled quite a bit in September but bounced back over the last week or so. It’s still not back to the previous high. The P/E ratio is reasonable, under 15.” 

Chart Courtesy of www.stockcharts.com

Kramer Views Civil Unrest Response of the National Guard as Signal on Stocks

“The challenge in translating civil unrest into a portfolio boost is that you need to find companies where the National Guard is a big enough customer that an uptick in deployments will move the revenue needle,” said Hilary Kramer, host of a national radio program, Millionaire Maker,” and head of the GameChangers and Value Authority advisory services.

“I’d steer clear of the big military contractors and munitions makers because their business is more dependent on the vast Pentagon appropriation cycle. 

Columnist and author Paul Dykewicz interviews money manager Hilary Kramer, whose premium advisory services include 2-Day TraderTurbo Trader, High Octane Trader and Inner Circle.

“CACI International Inc. (NASDAQ:CACI) becomes interesting if we see bigger extended domestic deployment in coming months,” Kramer said. “The company now handles payroll for the Army Guard and will be rolling out to another 800,000 reservists in the near future. It’s an interesting company and definitely an off-the-radar buy.”

Chart courtesy of www.stockcharts.com

Penny stock Global Digital Solutions Inc. (OTCMKTS:GDSI) might be as close as investors can find to a pure play on civil unrest response, since it builds vehicles for emergency and law enforcement agencies, Kramer said. In times of chaos, demand will rise for armored cars, she added.

Chart courtesy of www.stockcharts.com

Civil Unrest Response of the National Guard Indicates Small Stocks to Buy

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For long-term investors, Kramer mentioned TPT Global Tech Inc. (OTC:TPTW) and UAS Drone Corp. (OTC:USDR), “tiny companies” that have big ambitions to sell field antiseptic kits and specialized crowd control drones to the National Guard, respectfully.

“It won’t take a big contract to make a substantial difference to the bottom line of either company,” Kramer said.

Chart courtesy of www.stockcharts.com

Income investors looking for yield may like FLIR Systems Inc. (NASDAQ:FLIR), which isn’t about crowd control as much as selling search & rescue systems to the National Guard and other organizations, Kramer said. The stock offers a dividend yield of close to 2% right now.

Chart courtesy of www.stockcharts.com

“And I’m always happy to take a look at Olin Corp. (NYSE:OLN), which is a chemical company that happens to book about 10% of its business selling Winchester ammunition to a wide range of weapons owners,” Kramer said. “Never forget that while a firearm is yours to keep, you deplete your ammunition supply every time you practice. That makes OLN interesting no matter what happens with regulation… and at a yield within sight of 6%, the cash flow really makes a difference.”

Chart courtesy of www.stockcharts.com

Civil Unrest Response of the National Guard Signals Buy of Gun Stocks

Bryan Perry, who leads the Cash Machine investment newsletter and the Premium Income, Quick Income Trader, Breakout Profits Alert and Hi-Tech Trader advisory services, told me he likes Smith & Wesson Brands Inc. (NASDAQ:SWBI), a Springfield, Massachusetts-based manufacturer of firearms and ammunition, along with Sturm Ruger & Co. (NYSE:RGR), a Southport, Connecticut, gun maker. The latter company provides firearms for hunting, target practice and home protection.

Chart courtesy of www.stockcharts.com

Smith & Wesson Brands (NASDAQ: SWBI), announced on Sept. 3 financial results for first-quarter fiscal 2021, ended July 31, 2020, that addressed Firearms and Outdoor Products & Accessories. On August 24, 2020, the company announced that it had completed its spin-off of its Outdoor Products & Accessories segment. Therefore, first-quarter fiscal 2021 represents the final period in which the Smith & Wesson Brands, Inc. financial results will include the Outdoor Products & Accessories segment.

Chart courtesy of www.stockcharts.com

Paul Dykewicz interviews Bryan Perry at a MoneyShow conference.

The COVID-19 pandemic that last week infected President Trump and forced his hospitalization Friday, Oct. 2, until Monday, Oct. 5, also has led to 7,501,816 cases and 210,909 deaths in the United States, along with 35,814,815 cases and 1,049,854 deaths worldwide, as of Oct. 7, according to Johns Hopkins University. America has amassed the most cases and deaths by far of any country.

The civil unrest response of the National Guard offers a little-recognized signal of stocks to consider buying and others that are best to avoid. The National Guard’s role as America’s military responder to help during domestic crises when local, state and federal officials need it has gained heightened recognition during ill-fated 2020 with its global pandemic, natural disasters, protests and riots.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others.

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