Some Security Companies Fly in Face of Selloff

After last week's terrorists attacks, security no doubt is on most people's minds -- both physical and economic.

Police and army personnel carrying semiautomatic rifles swarm downtown Manhattan, checking travelers' identifications and bags. A similar scene can be found in Washington, D.C., and in airports across the nation.

On Monday, panicked investors searched for safe landings in a falling market and, to greet nervous investors, the New York Stock Exchange beefed up its security, although a representative from the exchange declined to answer just how. Major brokerage houses also decided to increase their protection, hiring additional personnel and inspecting incoming packages. And in a statement to the press after the market's opening bell, New York City Mayor Rudolph Guiliani emphasized protecting the city's people and the nation's economy.

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"We are going to be in a state of high alert for a long time, as our government determines what to do about this," the mayor told reporters. "We've got to make certain that the market can prevail over terrorism."

And that, analysts say, will increase the current $100 billion-a-year security industry. But the stocks of security companies -- ranging from surveillance systems to biometric devices like fingerprint scans or iris scans -- won't increase immediately, says Brian Ruttenberg, senior vice president at Morgan Keegan. "Because of bureaucracy. Much of the $40 million that has been appropriated by Congress to increase airport security will make its way to these companies, but it will be a couple of months."

Ruttenberg predicts that Identix(IDX) and Visionics(VSNX) will benefit from other companies increasing their security standards. Identix produces electronic fingerprinting machines that check a fingerprint against official files. Visionics creates face recognition technology that identifies faces from camera scans.

Identix's stock rose on Monday 71.4% to close at $7.20, while Visionics increased 93.2% to close at $8.25.

"Visionics will be able to take airport security to another high," Ruttenberg says. "[Security] at airports will not be solved with five-dollar-an-hour guards. I don't believe we are going to want armed guards on street corners. One way we can prevent this from happening in the future is by turning to technology."

Asked what role Visionics will play in securing our nation, Joseph Atick, chief executive officer of Visionics, says his company has not given any new guidance, but adds, "we have been at the forefront of combating crime. We want to help the FBI and the agencies involved in this national crisis."

InVision Technologies(INVN), producer of X-ray scanners, could be another hot stock, says Clint Morrison, director of research at Miller Johnson Steichen & Kinnard. "X-rays are the next generation of airport scanners."

InVision Technologies increased 165.3% on Monday to finish at $8.25.

Consider also NICE Systems(NICE), provider of voice logs to the Federal Aviation Administration, and air traffic navigation and radar logs to air control organizations. The company also provides voice recording and communications intelligence systems to government agencies. The stock rose 6.04% on Monday to close at $13.35.

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