Terror-Proof Your Portfolio

Scott Bleier
It has been disclosed that the arch-terrorists Usama bin Laden and Abu Musab al-Zarqawi have been in contact with regard to their mutual desire to attack the American homeland. If this exchange were disclosed just three years ago it would have received worldwide media attention, the color-coded alert would have been upgraded, and the stock market would have swooned—at least over a short-term timeframe. But now this news barely gets a mention on the news, the color-coded alert was not raised, and the stock market completely ignored it. As a matter of fact, the stock market is presently in the midst of its most substantial rally of the year!

It shows that America has made progress in the war on terror, and that the markets have become somewhat acclimated to the possibility of a domestic terror attack. The fact that the markets have adapted to the prospects of terrorism does not mean that the risk associated with it goes away, but shows that the markets care most about the economy and corporate profits.

Believe it or not, there are actually several sectors in the market that could benefit, and certain select stocks might actually rise in the case of a terrorist attack. Owning them can expose investors to business trends that are already underway and act as a buffer for your portfolio in the case of a domestic attack. One such group is homeland security and defense. Hybrid Investors currently recommends three such stocks. They are L-3 Communications (LLL), DRS Technologies (DRS), and United Defense Industries (UDI).

A second sector that could benefit is energy and oil/gas exploration and transportation. It is widely perceived that energy prices currently have a “terrorism premium” built-in to their price. If there were an attack, oil prices and the cost to transport oil would surely go higher. We currently recommend OMI Corp. (OMM), Sasol Ltd. (SSL), and Superior Energy Services (SPN).

As always, the most important action one can take is to pay careful attention to the investments in your portfolio. Don’t just put your brokerage statement in the drawer and hope for the best. Always keep some ready cash around for buying opportunities. Remember, there are always bearish market cycles or events that create fear in the marketplace. That is usually the most advantageous time to take risk.

This weekend our Business Block has much more on how politics affect YOUR investments. Tune in Saturday 10am — noon ET.

Scott Bleier is a FOX News business analyst and contributor, a regular panelist on " Bulls & Bears" and a frequent guest on " Your World w/Cavuto." Read Scott's full bio here.