This directive proves that the president is serious about some of his campaign promises. The required additional required spending would likely benefit several sectors.
Jan 27, 2017 9:05 AM EST
President Donald Trump has started trying to make good on his campaign promises.
One of his first areas of focus is securing the Mexican border and immigration from certain countries. Clearly, the Department of Homeland Security’s budget will rise.
There are sectors that could benefit from the construction of a wall along the border.
As hockey great Wayne Gretzky said, “Skate to where the puck is going to be, not where it has been.”
So, let’s review what the Secretary of Homeland Security John Kelly, said at his confirmation hearing: “A physical barrier in and of itself will not do the job. It has to be really a layered defense.”
Such a strategy requires border patrolling, sensors and surveillance systems. Unmanned aerial vehicles might be required for terrain where a wall might be difficult to build.
Border security requires a highly technology-focused approach including analytics and big data. It also requires artificial intelligence, biotmetric and cybersecurity solutions.
Then there are the more mundane provisions required such as basic brick and mortar, cement and steel.
Companies would need to build miles of roads parallel to the wall allowing construction and maintenance of the wall and more roads to connect key points along the walls with the nearest locations where border security and patrol forces would be situated.
The wall and the roads near it would need lighting and other utilities. Secure data connections, surveillance equipment and telecommunication would all be required.
Private contractors providing support personnel to the border security forces would probably be required. Combat and transportation vehicles and other logistics support would be needed.
A close read of Trump’s directive shows that besides building the wall, it provides for detention of illegal immigrants who do manage to cross the wall or enter the country otherwise. Detention facilities and contractors and services that can process the claims of legality of the detained individuals and provide services for deportation of those who don’t have legal grounds to stay would be required to implement this directive.
There are numerous companies whose products and services would be required to implement the directive.
But clearly, this is just the beginning. More such orders should be expected.
Similar actions at other entry points should be expected.
Expect marine security to be enhanced. Expect action at airports in terms of immigration and security.
Expect preemptive actions to prevent security incidents before they happen at U.S. assets in foreign locations. Expect cybersurveillance and predictive analytics to identify organizations and people that could be hostile.
Similar actions are already being taken by foreign governments, albeit with less focus. Trump’s high-profile directives could sharpen the focus on these security policies and create pressure on other governments and national leaders to deliver similar executive action against security incidents and threats, both proactively and reactively.
Global security and ancillary products and services budgets worldwide are expected to get a boost. The wall would likely have a multiplier effect on security budgets.
A deep analysis of potential areas of focus of these budgets and the companies and sectors that could benefit from these increases could yield significant gains.
Of course, a lot of this might be priced in already to the stocks of related companies. Savvy value investors are cognizant of that and don’t blindly invest in anything and everything labeled “defense” or “security.”
The most important factor for any investor should first be safety.
Is the company’s existing business stable? Is its balance sheet strong?
Is there a track record of reinvesting capital in value creating projects? And, most important, is the company available at a discount to its intrinsic value?
Wouldn’t it be great if there was an index providing a portfolio of global and U.S. companies that could benefit from the increased security consciousness and budgets? Well there is — our GLOSEC global security sector index.
This article is commentary by an independent contributor.