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The White House wasn't the only outfit seized last fall by the grand vision of creating an Office of Homeland Security.

On Oct. 17 -- just nine days after President Bush appointed Tom Ridge to lead the new national defense agency -- an unheralded communications company called



formed a homeland security office of its very own, "to specifically focus on providing solutions to chemical and biological terrorism."

Titan's office has lagged behind the White House version in issuing color-coded alert bulletins and staging photo ops at Mount Rushmore. But for Titan and its food-zapping offspring



, creating the office served a laudable purpose nonetheless. It helped put two little-known companies squarely in the midst of a frenzied nationwide rush for stocks that would benefit from the reaction to a now-omnipresent threat.

If the impulse to buy so-called

terror stocks

was understandable, however, the hollowness of the game soon became apparent. Even last fall, in the aftermath of the Sept. 11 terrorist strikes and October's anthrax scare, many observers doubted the sector's long-term investing prospects, saying contracts weren't firm enough and business plans weren't strong enough. In the end, the terror stock trend came to look like nothing more than another stock market fad, soaking investors who bought and held with significant losses. The sector has the dubious distinction of being the one post-9/11 stock-market bubble, inflating and bursting within 12 months.

Sky's the Limit

In the days and months following the terror attacks, Surebeam and Titan weren't the only companies that saw their shares soar as investors swept aside longstanding operating and financial questions to focus on a seemingly limitless market opportunity.

The companies swept up in this gold rush sold, or claimed they had plans to sell, face recognition technology, food irradiation gear and bomb detection devices. Investors anticipated big investments in these products to beef up airline security, protect the nation's food supply and secure key infrastructure. No project was too big nor any expectation too lofty.

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Even after a terror-free New Year's, many of the stocks sustained their exalted levels well into the spring.



, whose fingerprint-scanning technology is in use in some airports, saw its shares more than double after Sept. 11, hitting $15.74. The company later harvested the fruits of that appreciation to buy Visionics, another highflying face-recognition technology company whose shares had soared in the wake of Sept. 11.

But as time marched on, it became clear that the fall's big plans were giving way to a spring of disillusion. The problem wasn't simply one of false hope or broken promises: In some cases the science simply didn't apply the way people hoped.

Take fingerprint scanning: While the technology does work, it has not

yet been proven for such high-volume activities as screening airline passengers. Catching on to the scale issue, investors have since sold Identix shares back into the $6.50 range.

High Hopes

Other pitfalls emerged as investors bet on Titan and Surebeam. Nine days after the companies formed their homeland security office, they announced a $40 million contract with the U.S. Postal Service for devices that would detect and snuff out anthrax in mail. On that day alone Surebeam stock shot up nearly 28%. In Titan's statement at the time, the company lauded the deal as "an important step in the Postal Service's fight against terrorism."

But while the products were delivered and the postal service ponied up the $40 million, the devices were never used, according to Wil Williams, a spokesman for Titan. "It was never installed," says Williams says. "The

anthrax threat dissipated."

That fact shines the spotlight on another significant weakness of the antiterror investment bulls: Many people assumed that well-positioned companies would secure big repeat orders that perhaps would lead to longstanding supply deals with the government. But the last year has shown that as needs change and technologies evolve, the security game comes to look a lot more complicated.

Surebeam has returned to the low single-digits, putting it down 86% from its high, while Titan has lost 60% from its post Sept. 11 peak.

Back in the Saddle

Still, there are analysts who remain bullish on some of these companies. Surebeam still boasts backers who believe in the company's primary business of food irradiation.

"It has little to do with terrorism, in fact," says Anton Brenner, who has a strong buy rating on Surebeam at Roth Capital Partners, which doesn't do banking for Surebeam. "That was more of a diversion than anything else."

That said, Titan still operates its office of homeland security. "We are doing business in homeland security," Williams says. "We have a lot of contracts with the government." Alas, he couldn't say what they are because of national security concerns.