Monday, January 24, 2011

Criminal Minds: The Paranoid Portfolio (Part I)

I started to watch the US-TV-Series "Criminal Minds" on DVD. It`s about a FBI team which uses behavioral science to trace murderers. Most episodes begin with a innocent individual suddenly attacked and killed by an unknown person. You can get paranoid by watching the series.

Being a long time economist and a stock market investor, I thought there must be a huge market for companies offering security  solutions.  How could a investor benefit from this market?

Indeed, there are a lot of public companies (traded on stock markets) which offer some kind of security products, but you have to be very careful.

1. The Lock Makers

Sometimes it may help to lock apartments and houses to keep intruders out. The stock market seems to like this idea. The stock of Kaba (KBN.SW) did well in the last months, plus 35%. Kaba is a Swiss company which is listed on the Swiss Exchange (Z├╝rich).

Kaba claims to belong to the leaders of the global security industry. They offer access control solutions for buildings, facilities and areas, including key systems, door systems, access systems & enterprise data collection. The newest financial report (2009/10 per Jun 30, 2010) shows that profit climbed in this period 23% to CHF 86,9 million. The analysts of Vontobel Research report that Kaba - as most Swiss companies - earns most of its revenues on foreign markets (Americas 25%, Asia-Pacifik 11%, Europe, Near East, Africa 45%). They see it as a growth stock, but refer to the risk that a rising value of the Swiss Franc could hamper exports (because then the product get more expensive in $, € and other currencies).

Looking much more risky is Napco Security Technologies (Nasdaq: NSSC). They are manufacturers of electronic security equipment including alarms, locks and building access control systems. But Wall Street doesn`t seem to like them. The stock is stagnating just above one buck. The financial website of Yahoo shows that they had losses in the last quarters. Better to be safe than sorry.

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