Observing the Security and Protection Services industry can teach investors something very important about selecting investment opportunities by industry, writes stock analyst Joseph Cafariello for Seeking Alpha, a crowd sourced content service for financial markets.
His contention: Just because a company is categorized to the space does not imply it will perform like the space. Investors need to look past a company’s official labeling at its line-up of products and services.
Consider the three largest U.S. companies in the Security and Protection Services industry: ADT Corp. (NYSE: ADT), MSA Safety Inc. (NYSE: MSA) and The Brink’s Co. (NYSE: BCO). While all three are assigned to the same sector, they are viewed by market analysts and investment funds as overlapping other sectors. For instance, where the SPDR group of funds allots ADT and MSA to the Industrials, it assigns Brink’s to Business Services.
More important than classifications, Cafariello writes, the companies’ areas of focus are what ultimately account for their varied stock performance. Where ADT’s work is centered around residential and business security systems, MSA manufactures and supplies electronics, mechanical systems and materials to protect persons against hazardous or life threatening situations in various industries and the military. Brink’s is primarily focused on armored transportation of cash from banks, ATMs and businesses, in addition to offering payment processing solutions.
This explains why during the almost 6-year economic recovery since the market bottomed in early 2009, ADT and Brink’s have flatlined, while MSA has soared securely and safely. Ultimately, MSA has benefited more than its rivals from the recent boom in the energy and industrial sectors during the recovery.
Cafariello’s article is lengthy but it is chockablock with analysis and illustrated with graphical stock performance charts and related data. It’s worth delving into to grasp the broader picture of the driving forces behind these companies and the marketplace in general. Here is a summary of what’s included to pique your interest:
- The Security and Protection Services industry is expected to outperform the S&P broader market modestly this quarter, astronomically next quarter, significantly in 2015 and meaningfully beyond.
- Mean/high targets for the ADT, MSA Safety Inc. and Brink’s Co. range from 11% to 67% above current prices.
- Find out why ADT, more so than MSA and Brink’s, offers the best stock performance and investment value based on a metrics comparison.
Also, don’t miss SSI‘s February 2015 publication, the Business Issue. It will include our annual industry financial analysis. We’ll take an in-depth look at some of the trends that impacted the performance of various security sectors in 2014. (Click here to review the 2013 report that appeared in the February 2014 issue.)
