5 Stocks That Could Be Watching You, But Are You Watching Them?

Michael Teague |

PRISMThe hoopla that resulted from revelations about the National Security Agency’s PRISM program, that has been relying on private-sector know-how to collect so-called metadata on the phone calls and emails of American citizens, as well as foreigners of course, is a story that has kept on giving, as the drip drip of revelations has been more or less continuous since June. Finally, at least a little more critical attention has been paid to an organization known as the INSA.

The Intelligence and National Security Alliance, indeed a relatively unheralded outfit, was founded in 1979 as an informal meeting place for the NSA and the private companies with which it worked. Its character changed significantly in 2005 upon being restructured by a small group of important executives within the intelligence-contracting community, however, as a point of contact for the leaders of the industry and their counterparts in national intelligence.

If for no other reason, this information is important because back in 2007, the Office of the Director of National Intelligence gave a presentation that has since been made public indicating that no less than 70 percent of the U.S. Intelligence budget was being allocated to private contractors. That figure may seem abstract when expressed as a percentage, but appears somewhat less so when considering the fact that for the current year, a year of sequestration that the defense industry has repeatedly claimed could jeopardize the safety of the homeland, the intelligence budget is estimated at a total of some $80 billion dollars.

Some may find it troubling that an institution of such vital importance as national security is being farmed out at such astounding levels to the private sector where there is plenty of opportunity for the goal of increasing profitability to conflict with the goal of keeping the country safe within a constitutional framework. And there is a great deal of evidence to suggest that this is precisely what is happening, as veteran investigative journalist Tim Shorrock recently argued in The New York Times (and as he has been arguing, quite persuasively, for some time now).

The restructuring of the INSA that took place was largely the work of executives from none other than Booz Allen Hamilton (BAH), the source of the most recent scandal of course, as well as other prominent but lesser-known companies such as SAIC (SAI), Computer Sciences Corporation (CSC), and ManTech International (MANT).

These companies elected Mike McConnell, then Senior Vice President of Booz Allen, to chair the organization. Prior to his work in the private sector, McConnell had himself been the director of the NSA, until 1996 when he left to join BAH. In 2007, he was selected by then president George W. Bush to be the Director of National Intelligence, a post which he left in 2009 to rejoin, yes, Booz Allen Hamilton.

A look at the INSA’s website will reveal a long list of its corporate members, some of which include companies one would expect, such as Boeing (BA), Raytheon (RTN), Lockheed Martin (LMT), and even more conventional household names like HP (HPQ), IBM (IBM), Microsoft (MSFT), Verizon (VZ), Intel (INTC), Dell (DELL), and Google (GOOG).

But until Edward Snowden, a 29-year old tech analyst employed at Booz Allen for some three months, spilled the beans, the company was not familiar to those who do not devote particular attention to national security and intelligence matters.

Booz Allen Hamilton (BAH) – Listed as a member of the INSA’s “President’s Circle,” Booz Allen is owned by the private equity firm The Carlyle Group, and makes most of its money from the government. The “management and technology consulting services” firm received its first government contract in 1940, helping the U.S. Navy with preparations for WWII, and has grown since that time to become an industry leader. The company helps the NSA with communications, information technology and systems management. BAH’s has a market cap of $2.49 billion, with shares currently trading at $17.02, up nearly 24 percent year-to-date, and 79 percent over the past year. The company’s stock has not been significantly affected by the revelation that one of its employees leaked sensitive data about the highly controversial PRISM program.

ManTech International Corporation (MANT) – Also a member of the “President’s Circle,” ManTech provides technology and assistance for U.S. and international government security programs, including the collection and analysis of data, as well as what it calls “secrecy management.” The company has a market cap of $955.24 million, with shares trading for $25.80 as of Friday’s close. ManTech is up 1.1 percent in 2013, and nearly 15 percent over the past twelve months.

SAIC Inc. (SAI) – Founded in 1969, SAIC provides scientific and technical support to military and civilian government operations, both domestic and foreign, and also works with corporate clients, primarily through software security and systems design and installation. The company has a market cap of $4.39 billion, with shares trading at $13.07, up 26 percent in 2013, and 24 percent over the past 12 months.

CACI International Inc. (CACI) – The Arlington, Virginia company provides information technology services to both public and private sectors. Its work with the intelligence community involves primarily surveillance and reconnaissance, as well as cyber security. The company has a market cap of $1.41 billion, with shares trading at $61.41, up nearly 12 percent in 2013, and almost 20 percent over the past 12 months.

Computer Sciences Corporation (CSC) – Computer Sciences Corporation is another information technology firm that contracts with the NSA, alongside its contracts with the other government agencies as well as the private sector. The company has a market cap of $6.77 billion, with shares trading for $44.35, up 11 percent year-to-date and 83 percent over the past 12 months.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
CSC Computer Sciences Corporation 61.77 0.70 1.15 1,134,970
LMT Lockheed Martin Corporation 259.64 -6.74 -2.53 2,338,115
RTN Raytheon Company 146.23 -2.66 -1.79 2,170,350
INTC Intel Corporation 35.74 0.24 0.68 16,744,223
IBM International Business Machines Corp 165.59 0.80 0.49 2,479,989
MANT ManTech International Corporation 44.84 1.44 3.32 98,549
VZ Verizon Communications Inc. 51.11 -0.28 -0.54 7,849,939
GOOG Alphabet Inc. 775.93 4.74 0.61 1,217,015
CACI CACI International Inc. Class A 132.05 0.55 0.42 256,422
BAH Booz Allen Hamilton Holding Corporation 37.88 0.26 0.69 2,147,043
HPQ HP Inc. 16.18 0.03 0.15 7,920,818
BA Boeing Company (The) 155.47 1.33 0.86 2,236,271
MSFT Microsoft Corporation 60.97 -0.40 -0.65 16,955,826
HAFC Hanmi Financial Corporation 33.90 0.95 2.88 113,277

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