Here’s How to Invest in the Explosion of Spy Games

Due to the ongoing advancement of technology, privacy in the new millennium is a rare commodity.  Despite possible backlash and damaged reputations, corporations and governments continue to push the boundaries of surveillance in the name of obtaining information and profits.

Last year, a report revealed that UBS Investment Research incorporated satellite images of Walmart (NYSE:WMT) parking lots in order to better estimate customer traffic and sales.  However, a new development about Target (NYSE:TGT) from the New York Times takes customer tracking to a whole new level.  With the help of statistical guru Andrew Pole, Target is able to figure out which customers are pregnant in the second trimester, giving Target a jump on the competition.  “We knew that if we could identify them in their second trimester, there’s a good chance we could capture them for years,” Pole explained. “As soon as we get them buying diapers from us, they’re going to start buying everything else too.”  For years, it has been common for Target and other major companies such as Procter & Gamble (NYSE:PG) to collect data on shoppers.

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Target obtains a vast amount of information on its shoppers by assigning a Guest ID number to each shopper that tracks every purchase.  Pole says, “If you use a credit card or a coupon, or fill out a survey, or mail in a refund, or call the customer help line, or open an e-mail we’ve sent you or visit our Web site, we’ll record it and link it to your Guest ID.  We want to know everything we can.”  The foundation of tracking customers appears to be electronic forms of payments.  Investors looking to capitalize on the retail tracking trend should consider major credit card companies such as Mastercard (NYSE:MA) and Visa (NYSE:V).  In the past three years, shares of Mastercard have charged 150 percent higher, while Visa shares have gained 100 percent.  Both companies are also held by Warren Buffett’s Berkshire Hathaway (NYSE:BRKB).

The rise of the internet and social media sites have also prompted new privacy concerns.  Google (NASDAQ:GOOG), the king of search, recently raised eyebrows by announcing a new controversial privacy policy that takes effect on March 1.  It merges the privacy policies of all sites under the Google umbrella into one, including Gmail, Google+ and YouTube.  Any information users provide to one Google-related site will be shared by all.  Users are not allowed to opt out of the new policy unless they completely avoid using Google-related services.  Fox Van Allen from Tecca explains, “Google will soon have a massive, all-inclusive database of your most private information, from your political leanings to your searches for prescription drugs.”

On Friday, the WSJ also published an investigation that caught Google bypassing privacy settings on Apple’s (NASDAQ:AAPL) Safari Web browser, allowing advertisers to track unknowing users.  Investors looking for an internet company that is at the heart of online privacy concerns should consider Google.  Shares have gained nearly 80 percent in the past three years, and may experience a pullback as resistance of $620 comes into play.

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Government agencies are also turning to the internet and social media websites to monitor users.  A recent report from the Electronic Privacy Information Center details how the Department of Homeland Security paid more than $11 million of taxpayer money to General Dynamics (NYSE:GD) to troll the internet and analyze comments about DHS or other federal agencies.  The company, founded in 1899 and based in Virginia, was tasked with monitoring public reaction posted on Facebook, Twitter, The New York Times and other media outlets.  Although lawmakers are currently investigating the operation, General Dynamics is a diversified market leader in the defense industry.  The company was recently awarded a contract by the Department of Defense to provide information technology services to the Omnibus Network enterprise program.  Last month, General Dynamics was also awarded a $23.6 million contract by Lockheed Martin (NYSE:LMT) to produce gun systems for the F-35 Lightning II.  Shares of General Dynamics have increased more than 60 percent in the past three years and currently pay a stable dividend north of 2.5 percent.

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com