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America freaks out
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October 19, 2001: 5:55 p.m. ET
People are scared, and some investors are looking for ways to benefit. Don't play that game.
By David Futrelle
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NEW YORK (CNNmoney) - MSNBC and the Fox News Channel still festoon their coverage of our ongoing national crisis with the words "America Strikes Back" in giant block letters at the bottom of the screen. But Comedy Central's The Daily Show offers a far better reflection of the current jittery mood, dubbing its continuing coverage "America Freaks Out."
With everyone these days is a bit more conscious of security issues than they would like to be, it's hardly a surprise that investors have shown a sudden intense interest in a number of high-tech security companies that promise to help prevent future hijackings and other threats. Investors have paid particular attention to three small companies with similar names: InVision Technologies, Visionics, and Viisage.
All three companies have reportedly seen a sudden surge of interest in their products since Sept. 11. And at least some of this interest is translating into sales: Viisage and Visionics have in recent days reported signing contracts to deliver their face-scanning systems to U.S. airports. And on Friday, InVision's Quantum Magnetics subsidiary announced that it had snagged $729,000 Army contract to develop a high-tech landmine-detector.
Not surprisingly, all three stocks have risen precipitously since Sept. 11 as well, with Visionics (VSNX: down $0.67 to $12.65, Research, Estimates) and InVision (INVN: down $0.63 to $11.35, Research, Estimates) up roughly 200 percent and Viisage (VISG: down $0.89 to $11.01, Research, Estimates) up more than 400 percent.
As a result of these sudden surges, the companies are now valued as richly as any dot.com at the height of the Internet bubble. Visionics, unprofitable, trades for roughly 10 times sales. InVision and Viisage both sport P/Es in excess of 200.
Some fans of the stocks suggest they'll grow into their valuations as airports and other potentially vulnerable facilities ramp up their security spending. But there are a lot of potential stumbling blocks along the way. Though all three companies have reported a surge in interest in their products, it's not clear just how much of this interest will translate into actual sales - particularly given the many questions that still surround the technologies in question.
It's not at all clear, for example, if facial-recognition technology is really ready for prime time. Proponents of the technologies say they can quickly and reliably match faces caught on video with databases of known criminals and terrorists. And they point to impressive results in laboratory settings, and say that the systems have proved useful in the casinos where they are now used.
But the systems can be foiled by "disguises" as rudimentary as dark glasses and beards. They also generate countless "false positives" for every correct match they make. And there are the privacy issues as well: once the current mood of alarm and suspicion fades away - as it inevitably will - do we really want facial-recognition systems scanning public spaces for parking ticket scofflaws and holders of overdue library books?
If you're the sort of person who sees the Police's "Every Breath You Take" as a sweetly reassuring love song, not the chronicle of creepy obsession it was meant to be, these may be the stocks for you. Otherwise, I'd give them a pass. 
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