Defense Stocks Conversation with Scott
Sacknoff, Manager, SPADE Defense Index (NYSE: ^DXS)
The question being asked is, “How should
investors look at the terrorism events in Paris?”
Point Roberts WA, NEW YORK, NY – January 20, 2015 –
( www.investorideas.com newswire and
Homelanddefensestocks.com) - Investorideas.com, a global news source covering
leading sectors including defense and security, issues recent commentary from Scott Sacknoff, President of Spade Defense
Index (NYSE: ^DXS) following the recent Paris attacks and increased global terrorism
events.
Scott Sacknoff manages the SPADE
Defense Index (NYSE: DXS) which serves as the underlying index for PowerShares
Aerospace & Defense ETF (NYSE: PPA). http://www.spadeindex.com/
The question being asked is, “How
should investors look at the terrorism events in Paris?”
Scott Sacknoff, President of Spade Defense Index:
Terrorism is once again front and
center in the news. The physical attacks
in Paris in January 2015 were among a number that have taken place over the
past few weeks, including a raid by Belgian authorities killing two suspected
terrorists, an Ohio man who plotted to attack the U.S. Congress, satellite
images showing that Boko Haram wiped out a number of villages in Nigeria, as
well as their kidnapping of around 80 people in Cameroon; and of course, this
doesn’t even mention any of the cyber-focused attacks, which are not addressed
here.
The human impact to attacks such
as these are of course clear but the financial/investing impact is less
so. Identifying firms that benefit
immediately after terrorist actions is not as easy as it sounds. Even after 9/11 almost all stocks in the
United States declined immediately, including defense and security stocks. These rose once the situation stabilized a
bit and plans to increase funding to combat the terrorists were announced. Still one can draw conclusions. A bombing on
a plane will lead to increased security measures at airports; so firms that
manufacture scanners, such as American Science and Engineering (ASEI) or OSI
Systems (OSIS), should benefit and see increased orders over time. Likewise if
a missile were to down a plane, there would be calls for installing
anti-aircraft devices on commercial planes and so one would assume a rise in
stocks of companies that manufacture those devices. But the correlation is not absolute. With a
steady frequency of events, there is a history now that shows additional
funding does not necessarily flow immediately following a terrorist event; one
must consider the likelihood and availability of whether funds for the new
contracts will come.
As another example, following
several recent police interactions that led to deaths in Missouri, New York,
and elsewhere, there was a call for the police to utilize video collection
systems to record events in real-time.
After statements from elected officials stating their willingness to
allocate funds, one can see that there was an obvious rise in the stock price
of Taser (TASR), which offers said product. Whether it can maintain these
levels depends on whether municipalities deliver on their plans to buy their
product.
Where security and defense stocks
do benefit, consistently, is that the increased publicity of terrorist
activities leads to an underlying sense that we are never totally safe. It is
in this environment that spending on defense and security are considered an
important part of government funding and the sector can operate within a stable
budget environment. And a stable environment is one that benefits most
firms.
Read this release in full at http://www.investorideas.com/news/2015/defense/01201.asp
Q: Investorideas.com:
Regarding Paris, are there
technologies that investors should look toward that might be employed to
prevent situations like what occurred?
A: Scott Sacknoff, President of Spade Defense Index
It appears from news reports,
including an excellent summary in the New York Times, that the lead instigators
in Paris were known to authorities, had been arrested, and were on terrorist
watch lists. Over time, French
authorities appeared to decide that after years of inaction, at least that they
were aware of, it was no longer necessary to track these persons. No matter the
technology employed, even those some believe cross the boundaries of personal
freedoms, it is still the human element that sometimes makes the call.
Still technology is critical to
helping identify potential problems, whether dealing with “lone wolf” actions
of an individual, or small groups acting on their own or those associated with
a terror cell or network. And even when
it fails to identify the threat in advance, as it did in Paris or the Boston
Marathon, technology solutions were critical to capturing the suspects and
stopping them before they were able to pursue future attacks.
Key technologies in these efforts
are analytics for mining big data including automated video analysis, and
surveillance and reconnaissance systems and networks. All of these should see
growth in the coming years. In the world
of security, using statistical correlations and identifying patterns can be
like looking for a needle in a haystack. Still money is flowing in this
direction. The inherent value is known
to commercial entities (to identify consumer trends and process efficiencies)
as well as to the counterterrorism sector.
Firms operating at the intersection of security, cyber, and big data
include: Lockheed Martin, Booz Allen, CACI, and FireEye, to name but a few, as
well as the more commercial IBM, HP, Amazon, Cloudera, and Splunk’s of the
world.
Q: Investorideas.com:
Can you quantify investor reaction
to these recent events?
A: Scott Sacknoff, President of Spade Defense Index
Significant inflows into the
Powershares Aerospace & Defense ETF (NYSE: PPA), the fund that tracks the
benchmark SPADE Defense Index, have been detected over the past year. However,
considering the fund was up more than 48% in 2013 and nearly 12% in 2014, and
the Paris attacks coincided with a broad global market decline, there is really
no way to correlate gains in the fund with investors’ actions.
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