On the day of the take-over of the Capitol building in Washington D.C., gunshot detection company ShotSpotter (SSTI) languished as if nothing extraordinary happened. However, the next day, SSTI shot up 7.6%. The following day, SSTI gained another 5.3% and closed at an important 1 1/2 year high.
A sobering report on gun violence is likely a proximate driver of the price action in SSTI. On January 6th, ShotSpotter released a report titled: “ShotSpotter Data Reveals 2020 Gunshot Rates Up 48 Percent Across U.S. During A Year of Crisis.” The data from ShotSpotter described an alarming jump for 2020 in several measures of gun violence in the more than 100 U.S. cities using ShotSpotter technology:
- 48% year-over-year increase in gunfire incidents
- The Midwest suffered the worst with a 58% jump (the South suffered the least with a 19% increase)
- 36% year-over-year increase in ShotSpotter gun shot alerts, an 86% increase over the 3-year average on New Year’s Eve
Moreover, gun violence deaths (homicide, murder, and unintentional shootings) reached a record 19,289 according to the Gun Violence Archive.
The President of NOBLE (National Organization of Black Law Enforcement Executives) expressed hope that these numbers represent an outlier driven by the combination of the “…global pandemic, social justice protests, a divisive national election, and an increase in gun sales.” However, my less optimistic interpretation of the data leads me to believe ShotSpotter technology will be more important than ever to law enforcement. Traders and investors seem to agree so far.
The Trading Action
I have been a long-term bull in SSTI (through thick and thin). My last piece reviewed August, 2020 earnings when the stock surged 28.3% on a single day. The stock churned in place from there until November earnings. Despite pulling back 11.7%, SSTI eventually summoned enough momentum to close the gap and hit post-earnings highs. Plans to support local and state governments by an incoming Democratic government should provide additional support and momentum to ShotSpotter. The stock is a buy on the dips after this breakout.
Be careful out there!
Full disclosure: long SSTI