Digital Soldier

  • November 5, 2001
  • Peter Navarro

Peter
Navarro is an active swing trader who trades using a methodology he developed
which identifies sharp moves in stocks that are triggered by major events. When
he’s not trading, Peter is a business professor at the University of
California-Irvine. He holds a Ph.D. in economics from Harvard University and is
the author of “If
It’s Raining in Brazil, Buy Starbucks: The Investor’s Guide to Profiting
From News and Other Market-Moving Events.” Kill. This
has always been most excellent advice for soldiers, dating back to the days of
the Peloponnesian Wars and before.  But
in a post-Vietnam world that shuns body bags on TV and with a nasty war in
Afghanistan being waged by suicidal fanatics from caves and crevices, such
advice takes on an added and, indeed, a mega-political significance. That’s why the government’s “Land Warrior” and “Mounted
Warrior” programs are likely to, at some point, become the apple of Wall
Street’s eye.

Both programs are designed to create a state-of-the art
“digital soldier.” This is a
soldier that becomes an all-seeing, all-knowing walking computer, capable of
dropping into the most hostile terrain and wiping out the enemy.The helmet once used to shave and boil soup becomes a
laptop (or head-top?) computer, complete with a tiny helmet-mounted display. The uniform features built-in Global Positioning Satellite receptors,
navigation aids, a system to acquire and aim at targets, and a weapons systems
interface. And the lowly undershirt
may even have sensors to monitor bodily functions and detect the invasion of
biochemical agents. 

So who has the responsibility for developing this
technology for the U.S. military through the Land Warrior and Mounted Warrior
programs? It’s a team of five
companies headed by Pemstar Pacific Consultants.

Pemstar is responsible for the actual manufacturing
of program components. Additionally,
Pacific Consulting, which was acquired by Pemstar in September, designs the
hardware and software. 

According
to the company, “components developed by PEMSTAR Pacific Consultants for the
Land Warrior project include: wearable computers, radios and software that
provide voice and data communications capabilities; helmet-mounted displays with
maps showing individual soldiers and known threats in real time; a global
positioning system; navigation aids; daytime and nighttime enemy acquisition and
targeting; and a weapons system interface comprised of a video sight, thermal
sight, a digital compass and laser range finder.”

As
for the other four companies, Exponent is the project coordinator and also
provides some of the keyboards and displays. The Wexford Group is the project administrator while the Omega Training
Group trains the soldiers using the systems. Finally, there is CSC, which was
supplanted by Pemstar, as the project kingpin. It’s in charge of software and
logistics, the company’s major areas of expertise.


Now,
of these five companies, two trade on the Nasdaq —
 Pemstar

(
PMTR |
Quote |
Chart |
News |
PowerRating) and
 Exponent

(
EXPO |
Quote |
Chart |
News |
PowerRating) and one trades on the NYSE —
 Computer Sciences


(
CSC |
Quote |
Chart |
News |
PowerRating). 
Check out the charts.


 


So which, if any, of
these stocks interest me? I see all
three as “position trades,” meaning that any move may not
take place for some weeks or even months. It
will all depend on the unfolding of events in Afghanistan and elsewhere.
If, for example, the prototypes being developed by the Land Warrior
program are rushed into combat AND they are successful, the pop on these stocks
could be enormous — a la the Raytheon run-up during the Gulf War from the
Patriot missile success.

Of the three, my
favorite is PMTR. The MACD shows a bullish trend and relative strength is
bullish. Most important, from my
point of view, the stock is clearly under accumulation. PMTR also shows strong fundamentals, with a rating of B from
IBD.

As for both CSC and
EXPO, both their technicals and fundamentals are considerably weaker while my
main other beef with EXPO is the incredibly low volume it trades at — making it
a very illiquid play. 

Keep
your eye on PEC Solutions
(
PECS |
Quote |
Chart |
News |
PowerRating), as reported in last week’s column
 as a
terrorist-tracking macroplay.

If you have a
favorite macroplay you would like me to feature in this column, send me an
e-mail or go directly
to my web site https://www.peternavarro.com. 
I’d love to hear from you.

Peter