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Cybersecurity Stocks Getting a Big Equifax Boost

Cybersecurity stocks got a boost from last week’s Equinox data breach. It’s not the first or last time the sector will prosper from an act of cyber terror.

Last week’s massive data breach of one of America’s largest credit agencies has yet again highlighted the importance of cybersecurity. And as has become commonplace after a hack of a major company, investors came pouring into cybersecurity stocks.

The victim, of course, was Equifax (EFX), which had credit reports for 150 million customers stolen from it. Not surprisingly, EFX stock has been punished severely, down 17% in two trading sessions as of this writing. It will take years for Equifax to regain clients’ (and investors’) trust. Many of those who are selling out of Equifax are likely using the cash to buy cybersecurity stocks.

Cybersecurity companies aim to protect against what just happened to Equifax. And even though it failed in this case, firms like FireEye (FEYE), CyberArk (CYBR) and Palo Alto Networks (PANW) become more important—and higher profile—with every major data breach.

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That’s why shares of those companies jumped the last couple days. Just look at what has happened to these three cybersecurity stocks, plus a couple others, since last Thursday:

FEYE: +10%

CYBR: +3%

PANW: +1.3%

Fortinet (FTNT): +2.4%

Check Point Software Technologies (CHKP): +1.3%

For most cybersecurity stocks, this little Equifax-related mini-run is merely an extension of a much longer rally for the sector. Take a look at how each of the above stocks have performed since the start of 2017:

FEYE: +13%

CYBR: -7.5%

PANW: +15.9%

FTNT: +26.9%

CHKP: +33.2%

With the exception of CYBR, which is a small-cap stock and thus more thinly traded (and more prone to wild swings), all of these cybersecurity stocks are up double digits through the first eight-plus months of the year. Like the cybersecurity business itself, there’s risk in investing in these stocks. Of those five, only Fortinet and Check Point Software are profitable. But the trend is in their favor.

As cyberattacks become more sophisticated and wide-ranging, cybersecurity has become big business. Worldwide spending on security technology reached $80 billion last year, and is expected to top $108 billion by 2020. As sales continue to accelerate, more cyber security firms will likely become profitable, which will make investing in cybersecurity stocks feel less like scouring the internet without a firewall.

In the meantime, Equifax won’t be the last victim of a cybersecurity attack. It’s merely the latest in a long line of data breaches against major companies. There was the Target (TGT) hack in 2013, in which cyber hackers stole payment card information from 41 million customers, costing the retail giant $18.5 million in settlement money. There was the Sony data breach in 2014 by North Korean hackers infiltrating the company’s internal files and emails. And Yahoo (YHOO) was the subject of repeated attacks from 2013 to 2016, in which billions of Yahoo accounts were hacked.

Equifax is the latest cyber scandal. It’s not a good trend. But as the last few trading days revealed, it’s a good trend for cybersecurity stocks.

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Chris Preston is Cabot Wealth Network’s Vice President of Content and Chief Analyst of Cabot Stock of the Week and Cabot Value Investor .