[Beginning of Cramer's verbatim comments for this segment...]

Jim:          This week, we are focusing on one big trend that I do not think, sadly, is going away any time soon… the kind that you can fall back on with a whole shopping list of stocks when the market goes down… or even if you missed the big run to Dow 10,000... and are looking right now for something to start buying… that is how confident I am… and do you know what group that is?… it is homeland security… and counter terrorism… think of it as like “24” but without all the action… and a lot more stocks… and, of course, a much better looking leading man… no offense to Keifer Sutherland… why homeland security?… because unlike traditional defense contractors that make weapon systems… we know that even the Bolshevik’s… we know that even the Democrats in Congress are going to get this right.. I mean the Democrats in Congress are never going to vote to kill off domestic security spending… they might get rid of the anti-ballistic missile shield… or the F-22 fighter jet of the future.. but no one would dare vote against the nuts and bolts of homeland security spending… that is a sure way to make sure that you do not get re-elected.

And is not like the United States is the only country on earth that is dealing with a terrorist problem… there are huge growing international markets for many of these homeland security plays… that make them less to rely on just feeding on the Federal trough in America… and more able to sustain a major multi year rally… that is why we are doing a series all week… that is why I believe this theme, like the mobile internet tsunami, is one that you count on for the long haul… this is not tonight’s trade… it is why I have been highlighting different homeland security stocks every day of the week...

Today, I want to talk about what is perhaps the most interesting one of all… a technology that helps us to detect threats… dim the lights… thermal imaging… put your hands up… I am talking about infrared cameras and night vision systems… including the very awesome night vision goggles that help us track and locate terrorists and other threats that are not always available, visible, to the naked eye… this is the technology that lets our soldiers and spies own the night… even in foreign countries where we do not really know the terrain… our guys can see in the dark… their guys can’t… this is not a niche market… it is a $5.95b world wide market… and the best way that I think you can play… boy, this one really does have a hammer lock on this amazing technology.

The stock is… FLIR Systems Inc. (FLIR)…

Now FLIR gets about 53% of its sales from its government systems division… selling products that are used for surveillance, protecting strategic assets, drug enforcement, search and rescue, and targeting, and, yes, special ops… we use their technology to protect our bases in Iraq and Afghanistan… and those bases are going to last much longer than people thought when Obama took office… how about the domestic side?… New York’s major airports use FLIR cameras… so does Dallas, Ft. Worth in Texas… Logan up in Boston… it has also got its gear in petro, chemical and nuclear facilities… but if I told you which, they would have to kill me.

About 17% of FLIR’s sales comes from commercial applications… this includes the security of private businesses that must be defended… again petro, chemical and nuclear plants… something that I have been saying falls into the broad rubric of the umbrella of homeland security… as governments around the world have started thinking about creating regulations that would make companies spend more on protecting their own infrastructure… FLIR’s protects are used to protect the London Eye… that is that huge Ferris wheel… they were used for the G8 summit… they were used to prevent theft at a diamond mine in Nimbvia.

So how great is the thermal imaging business?… sales from FLIR’s security and surveillance area grew at nearly 50% in 2008.. that is pretty impressive… and the Google had great numbers tonight… 50%, uh uh… no one has it… the less sexy but more stable part of the business representing 30% of FLIR’s sales is thermography… these are infrared systems that are more focused on keeping our infrastructure in great condition… they are really kind of maintenance systems… they are used for predictive and preventive maintenance as well as building inspections and gas detection applications… alright, it is not as sexy as night vision goggles… but the company has 40% market share in this business… things like maintenance are less vulnerable even as homeland security you can not cut back on them… unless you want some huge critical piece of infrastructure to explode because you did not take care of it properly.

Given that there is about $2.2t in needed infrastructure work… in this country according to civil engineering studies… hey, we have got ourselves a growth market… in total FLIR has 22% market share in the thermal imaging business… that includes all of their applications… by the way, they are the low cost high volume supplier introducing new technologies that cost less than the other guys… since 2005, the number of units shipped by FLIR has increased by 90%… costs have fallen by 30%… this is a cool outfit… management is currently looking to bring to market an infrared camera that costs less than $500.. right now you can not get one for less than $3,000... FLIR has already come out with a camera that uses 30% less power and is 50% smaller than its previous model for commercial applications… this is why I think they are the best player in the thermal imaging game.

It is not just a play on the US… 38% of its sales from foreign countries… recently won a contract with India for surveillance planes… they are also working with the Columbian military… a storage institution… to provide them with infrared units for counter insurgence emissions… and since the US government recently relaxed export restrictions for non military cameras… I think that gives a nice boost to FLIR’s international sales.

Alright, why is the stock being held back?… one of the reasons that you might have wanted to stay away from the past… there is a big intellectual proprietary rowel with them and Raytheon… proprietary, it is a case that Raytheon brought against FLIR… but on September 1st, the judge who was hearing the case dismissed certain claims by Raytheon … and while the case is not completely over… it looks like it is much closer to a resolution that I think will go FLIR’s way… the company reports next week… Wednesday October 21st, the same day that Wells Fargo reports… it has got an analyst day coming up November 2nd… the company has been increasing bullish about orders for the year… if it dips anytime soon, and we have got a crazy market with intra day dips… I think that would give you a good entry point… with a good catalyst still ahead… the stock is not expensive… 18.8 times next years earnings… 19% long term growth rate.

Here is the bottom line…

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Bottom Line:     Our soldiers need to be able to see in the dark… our screeners need to be able to see suspicious people and objects that might be hidden to the naked eye… but visible to infrared… I think thermal imaging and FLIR Systems Inc. (FLIR), the best of breed thermal imaging play, are not going away… this stuff saves live… and it has the added benefit of potentially making you a lot of money.

 

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Market Results today: Dow:  + 47 Nasdaq:  + 1 S&P 500:  + 5 1 2 4 5 6 See all of tonight's stocks mentioned on Yahoo! Finance, here...