Warrior Cop Market Cap
The militarization of American law enforcement is in full swing. This is a potentially profitable trend for ManTech, BAE Systems, Stanley Black & Decker, Allison Transmission — and investors.
The Armed forces are cleaning house and police departments across America are the beneficiaries. Surplus military equipment from Iraq is quickly being snapped up by police departments — the militarization of American law enforcement is in full swing. This is a potentially profitable trend for investors.
Free as in Beer
Cash strapped state and local municipalities are looking for any and every way to save money while still providing services. The 1033 program has quickly become the answer. The 1033 program, aka The DoD Excess Property Program provides surplus equipment for free, or near free — is just too good for state and local governments to pass up. Since 2011, this program has given away over $700 million in equipment.
This program transfers surplus military equipment and supplies to state and local law enforcement. M-16 rifles, helicopters, Battle Dress Uniform (BDUs) military robots, and MRAPs. Police department need to replace an aging fleet of Lenco BearCart armored vehicle. To replace these needed vehicles, law enforcement agencies are looking at $200K each . They can get an MRAPs for free, or in some cases for as little as $2,000.
Caveat Emptor
A few lucky Police departments have just received 165 Mine-Resistant Ambush Protected vehicles, or MRAPs in 2013. MRAPS are 18 ton armored vehicles used to protect solder from IEDs in Iraq. Military officials revived 731 more request for the surplus military vehicles. These vehicles cost taxpayers dearly — $500K each. Though given to police departments for free, these vehicles will still come with a cost. Before law enforcement agencies can use them the MRAPs must be modified for civilian use.
An intimidatingly black police paint job, emergency lights, and better seating will cost police departments around $70K per MRAP . Not to mention MRAPs get horrible gas mileage — 5 miles per gallon. Even a civilian MRAP will be limited. Its sheer size and weight will restrict it from all but the most robust infrastructure — a crumbling American infrastructure and 13 ton MRAPs don’t mix.
Stock and Awe
Police clamor for military vehicles for the quality and the “shock and awe” that these vehicle exude. MRAPs are armored, heavy and intimidating. MRAPs are already paying dividends for some police department. In Boise Idaho the police recently deployed a MRAP in a SWAT stand-down. In other cities MRAPs have been used to protect officers from explosions while dealing with bomb threats. As the police increasingly become militarized who will capitalize most from this trend? Here are four firms poised to profit as MRAPs and BDUs become part and parcel of policing.
Service is Key
In 2012, ManTech International Corp (NASDAQ: MANT) was awarded $507 million to provide support for the nations fleet of MRAPs. Under the 2012 agreement, ManTech provides service and repair for battle damaged MRAPs. They also repair mechanical and systems failures while providing modification services for the entire MRAPs fleet. ManTech stock is up just over 10% YTD and earns a 21 cent dividend. This firm will be called upon by bigger state and local governments to service civilian MRAPs since ManTech is the preeminent MRAP service provides on Earth.
BAE Systems (LON: BA) got a $37.6 million contract to provide spare parts and kits to the Army for its remaining MRAPs. BAE systems will also convert the larger MRAPs into Medium Mine Protected Vehicles (MMPVs). This conversion process includes some of the modifications needed to convert surplus MRAPs into civilian vehicles. BAE Systems Anniston Alabama system facility will be able to undoubtedly handle MRAP modifications — be they military or civilian.
The BAE Systems stock is up over 25% YTD, and you have two viable choices to own the firm. BAE Systems, the OTC bargain price of $28 per share or for the princely sum of $432 per share price on the London Stock Exchange. Either way this stock provides great cover, since BAE Systems global business is so robust. They have lucrative defence contracts in Oman, Saudi Arabia and India — growing hot spots with lots of scrillia.
Hand Me that Wrench
Stanley Black & Decker, (NYSE: SWK) may seem like a strange name to be associated with MRAPs, but bear with me. Small municipalities might not be able to call on the ManTech’s and BAE Systems’ to service or repair MRAPS — they may need to DYI their MRAPS. Stanley sells a New MRAP Repair Kit. The Deployable Technician Tool it (DTTK) for MRAP field Repair will become a needed accessory for every civilian MRAP owner.
Stanley is a pricier stock of the lot at $80 per share, but this stock is worth a second look. With a dividend of 50 cents and strong institutional ownership (83%) you have value and stability in one stock. The current DYI craze sweeping America also helps the toolmaker.
The Trend is Your Friend
This last firm will definitely profit off of MRAPs no matter who owns them. Allison Transmission Holdings (NYSE: ALSN) products are key components in a variety of military vehicles — the MRAP is no exception. The Allison 3000 series transmission is used in the all 9,000 of the MaxxPro MRAPs made by Navistar Defense.
The Army will only keep 3000. Many of the reaming remaining 6000 MaxxPro MRAPs will serve in state and local municipalities, some will go overseas. No mater where they go, those Allison Transmissions will need parts and service. Allison’s stock is as solid as they come. Up 32% YTD, this stock is affordable at $27 per share. They only issues for me is a high PE (35.02), but this firm hold a strong market-share with no real competition.
Civil libertarians aside, the militarization of the police is here and its only going to continue. These four stocks are not only poised to profit, they each are singularly positioned to be on the front lines of the militarization trend.
