Shares of gun company Smith & Wesson (SWHC) are up over 10% Tuesday after it raised third-quarter and full-year guidance. That indicates a quarter that will be "sharply better than expected," TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio, said on CNBC's "Mad Dash" segment.
The stock has been on a tear over the past year, he added, with shares up 179% over the past 12 months.
Why are these gun stocks smoking hot? There's only a very limited way to play the gun trade since there are few stocks from which to choose, Cramer explained. Each time there is a shooting that triggers talk about tougher gun control, many consumers rush to buy more guns.
As high as these stocks have gun, they can go higher, Cramer added. For instance, if Smith & Wesson is able to generate earnings per share of $1.50 and shares trade at 20 times earnings --below its current price-to-earnings ratio of 25 -- that would justify a $30 stock price, Cramer explained. Smith & Wesson shares currently trade around $26.
At the time of publication, Cramer's Action Alerts PLUS had no position in companies mentioned.