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.

Source:  Ocean Piracy: Fill Your Trading Account With Booty From The “Pirate Portfolio”

And since the situation in Georgia has effectively created a new Cold War status, it’s worth reviewing where the profit opportunities will be this time, and which countries the sensible, geo-strategically conscious investor will avoid – especially since Vladimir Putin looks a lot more dangerous than the sluggardly Leonid Brezhnev.

Danger on the Inside

You probably didn’t have much money in Georgia, Ukraine, or Kazakhstan, the three countries most immediately affected by this.

That’s good. And here’s why:

• Georgia, which had been well run economically, but was too small to be on most investors’ radar screens, has become a very dangerous investment location, indeed.
• Kazakhstan is likely to turn much more hostile to Western investors as it reorients itself towards a newly aggressive Russia. Companies like Italy’s Eni S.p.A. (ADR: E) that had appeared to do well out of their ability to invest in difficult environments like Kazakhstan will watch as that “difficult” mutates to “impossible,” perhaps even losing their proverbial shirts there.
• Only the Ukraine seems to be trying its best to remain pro-Western, with its president, Viktor Yushchenko, flying in to Tbilisi to express solidarity with Georgia. However Ukraine has a presidential election next year – and no prize for guessing who will be trying to influence that election in favor of a pro-Russian anti-Western candidate, by violent means if necessary.

Then there’s Russia itself. Investing in Russia has always been a bit like visiting Las Vegas – but now it’s like wagering large amounts of money in a casino you know to be controlled by the Mafia. You might win, but the downside potential is much greater than the upside.

What’s more, Russia’s tendency to take aggressive action without worrying about Western reactions is likely to cause sharp stock market crashes when it happens, as Wall Street panics and rushes for the exits. And it’s not as if Russia is economically well run; they have done very well since 2000, but entirely because of rising oil prices. At some stage, oil prices will reverse – at which point Russia, with its thuggish approach and expensive military machine, is likely to run out of money quite quickly. As with Venezuela, foreign investors will then be the most obvious people to loot.

Watching and Waiting to Feel the Pain

There are also implications for investors outside these most-deeply affected countries – but those implications are much-less extreme.

Most of the Eurozone is vulnerable to energy blackmail by Putin’s Russia, which has effectively put out of action the oil and gas pipelines that pumped non-Russian energy through Georgia. Moreover, if Russia’s belligerence continues, this new Cold War reality will force EU countries to reverse their current plans calling for minimal defense spending – they will want to protect both themselves and the particularly vulnerable EU members of Eastern Europe (notably Estonia, Latvia and Lithuania, which were part of the Soviet Union in 1940-1991) from sudden Russian assaults.

On one hand, that will put an immense strain on government finances and slow economic growth. On the other hand, such defense-oriented stocks as BAE Systems PLC (Pink Sheets ADR: BAESY) and EADS (Pink Sheets ADR: EADSY) can be expected to benefit.

The United States will also need to boost its defense spending – no matter which candidate wins November’s presidential election, putting a major strain on an already sagging U.S. federal budget, probably leading to higher interest rates and lower economic growth.

Defense industry favorites, especially those oriented towards high-tech conventional war such as The Boeing Co. (BA), B-2 Stealth Bomber maker Northrop Grumman Corp. (NOC) and Lockheed Martin Corp. (LMT) can be expected to benefit accordingly, as these firms did during the 1980s, in the last major military buildup of the Cold War.