The saga on the high seas continues… 

As much of the world continues to monitor the story of the American cargo ship captured by Somali pirates and holding its captain hostage, the increase in piracy has sparked a fascinating conversation.

It involves the use of innovative products that enable shippers to defend themselves from pirate attacks. 

While it may not seem like a lucrative business, the uptick in high seas shenanagins over the past year or so threatens to become more prevalent if it’s not addressed. And with millions of dollars worth of cargo traveling by sea every day, both the shipping industry and the companies whose cargo they’re hauling hardly want to see the trend become a full-blown epidemic. 

At the moment, however, only the Department of Defense and various small private companies are responsible for mobility denial systems. Described as an oil slick in a can, these weapons make it difficult for bandits to board (and remain on) a ship. 

But there are a few major, publicly traded American companies that are combating this problem amid their other defense issues. 

Take That, Jack Sparrow 

First up, one of the world’s largest defense companies, Lockheed Martin (NYSE: LMT). The firm has partnered with BAE Systems PLC. (Pink Sheets: BAESY) and Israeli weapons systems developer Rafael Armament Development Authority to develop The Protector. 

While it sounds like the hero of a 1980s action movie, The Protector Anti-Piracy Robot is an unmanned robot with a mounted 7.62mm machine gun. Originally designed to protect harbors, The Protector is capable of defending ships from attackers, while keeping the crew out of harm’s way. 

A more widely used form of anti-pirate defense is Long Range Acoustic Device (LRAD) systems, designed by American Technology Corporation (Nasdaq: ATCO). 

Equipped with high-powered speaker systems, these devices can be used to issue ear-splitting beams of sound directly at the bandits, or provide verbal warnings (no word, though, as to whether, “Back, ye scurvy dogs!” is on the list of available commands).

Despite the fact that these systems are more common, keep in mind that ATCO is a tiny stock and can be illiquid. 

Here are three other ways to play the piracy protection trend: 

Three Ways To Play High Seas Banditry 

The Defense Angle: You can’t dip into many sectors or industries these days without finding the presence of General Electric (NYSE: GE). 

The company’s defense subsidiary, GE Security, offers various communications systems that are used to enhance ocean security. 

The Insurance Angle: In addition to direct defense sector plays, there are also several insurers and reinsurers, which have an important maritime business and could face exposure if a ship is lost at sea. These include CNA Financial Corp. (NYSE: CNA), Marsh & McLennan Companies (NYSE: MMC) and Willis Group Holdings (NYSE: WSH). 

The Cargo Angle: Consider commodity plays on cargo like oil. If oil cannot be shipped directly for fear of it being intercepted by pirates, it could drive up the price. A straightforward, more diverse (and thus less risky), cheaper and safer way to play this would be to buy an ETF like the U.S. Oil Fund ETF (NYSE: USO). 

You could also consider timber companies like Plum Creek Timber (Nasdaq: PLUM). It’s historically a solid market outperformer anyway, which isn’t a bad investment to have in your portfolio at times like these.

Move With The Waves As This Maritime Trend Grows

For pirates, the lure of capturing easy booty from an unsecured ship in the middle of an ocean is an attractive proposition. 

And while the current US-Somali standoff will eventually end (hopefully in peace), companies are realizing that there’s a more pressing need to secure their cargo and crews while at sea. 

In an economy where it’s mighty difficult to make money at the moment, the prospect of losing cargo to pirates will force companies to pay for the security products and services that can protect their haul. 

While the majority of the companies in the maritime security space are small and privately owned, if the piracy trend increases, you’ll likely see more well established firms enter the market – especially those with long histories of securing government contracts, such as Lockheed and GE. 

Hoping your longs go up and your shorts go down. 

by Marc Lichtenfeld
Smart Profits Report