If you’re looking for a sector that will have momentum after the election and into 2021, you may want to consider law enforcement stocks. In a matter of minutes in late May, 2020 became an even more challenging year than it already was.
I’m talking about the killing of George Floyd. And the rioting and looting, and yes the peaceful protests as well, that have put social justice on the front burner in a way this country hasn’t seen since the 1960s.
Now issues like defunding police departments are being weighed against legitimate concerns over public safety. The two opposing sides are about as entrenched in their positions as you can imagine. And that is making law enforcement a central issue in a presidential election that is already volatile enough.
This won’t be the first time that law enforcement issues have come up in presidential elections. However the last time I recall the issue having any traction was the Violent Crime Control and Law Enforcement Act of 1994 (otherwise known as the Crime bill).
No matter who wins the election in November, law enforcement reform will be a central issue on the national agenda. As an investor that means adding the right law enforcement stocks will present a profitable opportunity. Here are four stocks to watch:
- Axon Enterprises (NASDAQ:AAXN)
- Digital Ally (NASDAQ:DGLY)
- ShotSpotter (NASDAQ:SSTI)
- Wrap Technologies (NASDAQ:WRTC)
Axon Enterprises (AAXN)
The first of the law enforcement stocks I’m recommending is Axon Enterprises. Axon is best known for the Taser, which is a non-lethal alternative to guns with live bullets. Personal security and self-defense are going to remain a hot sector for the foreseeable future. And that creates a catalyst beyond law enforcement for AAXN stock.
However, if you’re thinking about Axon as just a Taser company, you’re missing the larger story. The company is the market leader in other equipment designed to aid law enforcement such as body cameras and dashboard cameras. If the need for body cameras was not already evident, the events of this summer have made the need self-evident to law enforcement officers throughout the world.
Axon also runs a digital evidence software database, Evidence.com that allows data collected from cameras to be easily stored, shared, analyzed and managed.
The stock is up 38% in 2020 and most of that gain has occurred since early June.
Digital Ally (DLGY)
Digital Ally is known for its advanced video recording products, particularly body cameras, for law enforcement and other emergency management personnel. The stock jumped 5% in June when the Danville, Illinois police department placed a large order for the company’s body cameras and in-car systems.
However the stock is also doubling as a neat little play on the Covid-19 pandemic. In September, the company got a big order from Linn County, Kansas. The county is going to install 42 ThermoVu non-contact temperature screening devices through the county as a way to detect high temperatures.
In addition to the products going in government facilities, they will also be used in populated public areas to help monitor staff and visitors. The device also includes facial recognition technology that will aid in security efforts.
DLGY stock is up 98% in 2020 but still remains a penny stock. Any investment, therefore, is a speculative bet at best.
ShotSpotter is bringing technology into law enforcement stocks in an interesting way.
The company’s signature product, ShotSpotter Flex is a real-time gunshot detection system. This system helps first responders know when a gun was shot. The company also offers a variety of other products including a cloud-based patrol management solution, ShotSpotter Missions. This helps police departments plan patrol missions and tactics for crime deterrence.
The company does have revenue coming in. And in 2019, the company posted a revenue retention rate of 111%. That would seem to suggest that where the company has its products seeded, it is successful.
However critics will cite that although the company’s products are in 101 U.S. cities, the company, at this time, is heavily dependent on the New York and Chicago markets. As such, it is projecting growth in the single digits which is not enough to get some speculative investors excited.
However, SSTI stock is up nearly 19% for the year.
Wrap Technologies (WRTC)
Wrap Technologies has not fared so well in 2020, but is still worth keeping an eye on. Wrap is attempting to bring the BolaWrap to market as a way to restrain individuals without having to use lethal force or subject them to injury.
In 2019, the company delivered the BolaWrap to over 140 police departments in the United States. And the device is currently being used in 27 countries throughout the world. Indonesia represents one of the major success stories. Their 387,000-member police department has made a follow-up purchase.
The company currently is piloting 200 of the devices with the Los Angeles Police Department. Obviously this would be a feather in the cap for Wrap Technologies. However, as of this writing, the LAPD was asking for an additional six-month period to evaluate the devices. In the initial 180 days, the department only used the devices nine times. Furthermore in one-third of those cases, the department deemed the devices ineffective.
Unlike the other law enforcement stocks I’m writing about, WRTC stock is down 11% for the year. As a micro-cap company Wrap Technologies presents significant risk, particularly since it is still not profitable.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.
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