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Who Says Big Brother’s a Bad Thing?

Homeland security is a secular growth trend on par with the mobile Internet, Cramer told viewers on Tuesday. Whether the world’s economies are booming or not, governments across the globe are spending big bucks to keep their citizens and institutions safe from attack. Private companies are doing the same to protect their customers and networks. This inflow of cash makes the sector a great investment for anyone looking to sidestep the market’s typical volatility.

  • 15 Rules for Playing Defense

Cramer highlighted ArcSight and American Science and Engineering on Monday, but today shifted focus to NICE Systems . The Israeli company makes products that capture, manage and analyze suspicious communications via phone calls, video, radio and e-mail, making its technology the first line of defense for city centers and major infrastructure like bridges and power plants. NICE provides security to clients as varied as New Jersey Transit, the Beijing subway system and the Eiffel Tower.

“Before you can catch the bad guys, you have to know who they are and what they’re up to,” Cramer said. “NICE gives us that capacity.”

While NICE’s bread-and-butter is Internet Protocol-based video surveillance, the company offers enterprise solutions as well. Two key acquisitions – first Actimize in 2007 and Fortent last month – have beefed up its fraud and money-laundering detection systems, the latter also helping to deliver top-tier clients. Some facts and figures to put this into perspective: This market is growing at a rate of 13% and should reach $3.75 billion in 2012. That’s up from $2.6 billion this year. And NICE plans to expand this technology to non-financial business, which will increase the size of its addressable market.

Admittedly, there are a number of companies in this space, but Cramer chose NICE “because it’s the best of breed.” Management said during the last conference call that the latter half of 2009 should see increased revenue and earnings growth thanks to a number of newly minted deals. We’ll find out if that’s true in three weeks when the company reports earnings. Also, Verint is still struggling to integrate its acquisition of Witness Systems, which gives NICE “a solid competitive edge” over a key rival.

NICE’s balance sheet carries $475 million in cash, or $7.70 of cash per share in this $30 name. With a price-to-earnings multiple of 17.7 and a long-term growth rate of 17%, the stock is not expensive, Cramer said. But he did recommend that investors wait for a pullback before buying.

The bottom line, though, is that date, voice and video analytics are both countries’ and companies’ first line of defense, Cramer said, “and the best way to play the space – NICE Systems.”

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  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

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