Investors are watching the watchers.

Surveillance and imaging technology makers are thriving as their advanced systems find a ready market among military, federal and law enforcement agencies.

Officials are buying up sensors and thermal-vision and motion-stabilized cameras. The funding pipeline is flowing.

"The whole surveillance side, especially within the government sector, has a lot of growth going on," said John Slye, an analyst at government research firm Input. Eager buyers include Homeland Security, the Department of Defense and U.S. intelligence agencies.

A variety of companies large and small compete in surveillance technology. Three have been particularly popular with investors recently: Axsys Technologies (AXYS), Flir Systems (FLIR) and Elbit Systems (ESLT).

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Axsys' stock has more than tripled over the past 12 months. Shares of Flir have risen more than 60%, and Elbit shares have grown more than 40%. The three are the strongest performers among the 17 firms in IBD's military electronics group.

The group as a whole is up 29%, and its largest firm, L-3 Communications Holdings (LLL), is up 25%. By contrast, the S&P 500 has fallen 5%.

Full article here.