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Post-Tsunami Spotlight on Taylor
Tuesday December 28, 10:30 am ET
By Rich Duprey
When tragedy strikes, it's not surprising to see shares in companies that sell products that can help avert them rise accordingly.
After the terrorist attacks of September 11, companies that catered to the newly created "homeland security" industry benefited from investor interest. Global consulting firm Kroll, which did background checks for airport screeners, posted double-digit revenue growth and saw its stock price quadruple before being bought out by Marsh & McLennan (NYSE: MMC - News) this summer. Luggage scanner InVision Technologies (Nasdaq: INVN - News) was up over 1300% between September 11 and March of this year when General Electric (NYSE: GE - News) placed a bid for it.
In the wake of the horrific devastation caused by Sunday's tsunamis in Asia, it should not be surprising that shares in little-known Taylor Devices (Nasdaq: TAYD - News) rose 172% yesterday as investors bet that interest in its earthquake "shock absorber" technology would be in greater demand.
The tsunamis, or giant tidal waves, were caused by a 9.0-magnitude earthquake deep beneath the Indian Ocean. As the giant walls of water radiated from the epicenter, there was little warning of their approach. This type of natural disaster is rare in the region, occurring about once a century; as a result, warning devices are uncommon in the 11 countries hit by the gigantic tidal waves. Protecting buildings from the effects of earthquakes has been a low priority in the region as well. Taiwan is one of the few countries in Asia that has a strict seismic code similar to the one in force in the U.S. Following the weekend's tragedy, Taylor Devices is seeing renewed awareness of its technology.
The company makes dampers for buildings, bridges, and other structures to absorb the shocks created in the aftermath of an earthquake. The dampers are based on technology that was used to protect ballistic missile silos from potential attacks by the Soviets -- and the U.S. government was Taylor's sole customer for 45 years. After the Cold War ended, the company obtained permission to commercialize the technology. It has completed about 150 projects around the world -- primarily for public structures, such as stadiums and hospitals. Still, most of its work is on the West Coast of the U.S.
As is all too common, it often takes a tragedy to spur people to action, and Taylor expects the weekend's devastation to spur governments in the region to think more seriously about protecting buildings, structures, and ultimately people, from earthquake ruin. Because of its prior relationship with the U.S. government, there is little competition for its products, which -- in addition to the seismic damper technology -- include seismic isolators, self-adjusting shock absorbers, and vibration dampers in electronic and optical systems used by the air, ship, and space industries. The shock absorbers can be installed on new buildings or retrofitted to existing structures.
Until yesterday, Taylor Devices had toiled in relative obscurity in penny stock territory. It got a temporary boost after the 2001 terrorist attacks, when its stock nearly doubled in the intervening months, only to fall back to its historical trading range. It remains to be seen whether yesterday's gains will hold or whether it will take another tragedy to sustain Taylor's current lofty price.
The American Red Cross is one of many relief organizations accepting financial contributions from people who want to help the tsunami survivors. Contributions can be made to its International Response Fund. Other groups include CARE International and Oxfam America.
Fool contributor Rich Duprey does not own any of the stocks mentioned in this article.