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What Is a Security Stock?

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  • Written By: Geri Terzo
  • Edited By: A. Joseph
  • Last Modified Date: 20 November 2016
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The presence of terrorism around the world has put countries on high security alert at airports, in office buildings and in other public places. As a result, the companies that are behind the technology of the security itself have become more in demand. Many of these companies have become more valuable in the financial markets as security stocks have become more popular, and some companies have issued shares in the financial markets as a result of the heightened interest. An individual stock or bond can also be called a security, but the term "security stock" usually refers to stock in a company in the security sector.

A defense stock or homeland security stock could fall under any of a number of specific areas. For instance, a biodefense company makes systems and develops technology that protect a country against a bioterrorism attack. Such an attack could include some form of chemical or biological warfare posing a threat to civilians or military personnel. A security stock tends to get more attention from investors when there is some fear about terrorism or a nuclear war.

Another type of security stock can be found in the pharmaceutical sector. The same companies that develop drugs to battle cancer might develop vaccines to protect against some type of bioterrorism attack. These development efforts ebb and flow depending on government polices and programs designed to protect a country from any threats or pandemics.

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Security stocks can be related to any type of threat to a nation's security, and airport technology stocks are no exception. The companies behind the security systems used in airports, such as body scanners and bomb detectors, experience an increase in stock value during times of unrest. This type of security stock tends to be quite volatile because when attention shifts away from the threat of terror, investors often turn their attention toward the hot sector of the moment, but when uncertainty about safety returns, these stocks go back into the spotlight.

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