Equifax (EFX), one of the biggest consumer credit bureaus, just reported that it suffered a major hack of its customers’ personal data—one that may have affected more than 143 million people! And that’s just one of the significant hacks so far in 2017, all of which have driven up cybersecurity stocks.
Here is a partial list of events that have affected the personal security of folks in the last few months:
- HBO: 1.5 terabytes (more than one trillion bytes) of data, including leaked shows, but more importantly, data on thousands of its employees.
- Theft of cryptocurrency: $39 million of Ethereum and nearly $1million in Bithumb. Additionally, data of 30,000 Bithumb’s customer data was accessed.
- ShadowBrokers using ransomware attacks on NSA data
- Ransomware by WannaCry that infected U.K. medical procedures and patients
- Petya, NotPetya infected networks of U.S. pharmaceutical company Merck, Danish shipping company Maersk, and Russian oil giant Rosnoft
- WikiLeaks Vault 7, which stole 8,761 documents from the CIA
- Malware that stole customer credit card data from most of Chipotle’s restaurants
Experts say that cybercrime puts a $450-$600 billion dent in bottom lines across the globe every year. And that can not only have a devastating impact on each of us through our personal credit circumstances, but can also hurt us financially through the stocks we own.
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Consumer-review site Comparitech reports that it studied 24 hacked businesses and found that their stock fell an average of 0.43% the day of the attack and even three years later, still lagged the Nasdaq benchmark by more than 40%!
And it’s not cheap to combat this wave of cybercrime. Consulting firm KPMG did an analysis of Target’s big ID theft in 2013, which affected some 40 million credit card accounts. It estimated that total costs, including customers’ credit monitoring, call center staffing and its own cybersecurity team, amounted to $60 million. And that’s just one incident!
When you add in the “slow-burn” costs of system upgrades and litigation, that number reaches almost $200 million. And that latter expense has created a tremendous opportunity for companies who can step in and create a solid cybersecurity system for others. Cybersecurity Ventures forecasts that global spending on cybersecurity products and services will reach $6 trillion annually by 2021.
From mega corporations to the smallest mom and pop, in today’s world of teenagers daring each other to make mischief to sophisticated hacking syndicates, every company needs a system to prevent cybercrime. Cybersecurity companies are popping up with the speed of light; it reminds me somewhat of the tech bubble and bust of the late 2000s. And the recollection of the millions of investment money lost during that period is a good reason why it’s imperative to be very careful when selecting which stocks to buy.
Certainly, there are plenty of speculative cybersecurity stocks to buy, and some of them will most likely pay off handsomely. But it’s tough to ferret out which of the speculative companies will be those who not only survive, but flourish.
But there are also many more established companies that have added cybersecurity to their roster of services and products—companies who have already proven their excellence by years of profits that have boosted their share prices and brought great fortune to their shareholders. As well, I’ve had my eye on some relative newcomers into the field with a few years of track records, that also look attractive.
And those are the companies in which I am interested, and which you may want to add to your list of possibilities. I found 11 cybersecurity stocks that have potential, and five that I really like. Here are the five.
The Five Best Cybersecurity Stocks
Cybersecurity Stock to Buy: Cisco Systems (CSCO)
Cisco Systems is one of the giants, $160 billion in market cap. The company provides networking products related to the communications and information technology industry worldwide, both mobile and wired. Cisco’s cybersecurity business accounts for only some $500 million in revenues, just a smidgen of its total sales, but it is responsible for pushing the company’s revenues into double-digit territory.
Cybersecurity Stock to Buy: Palo Alto Networks (PANW)
Palo Alto has a market cap of almost $14 billion. PANW provides firewall protection to corporations and governments worldwide. The company beat analysts’ estimates by 13 cents in its latest quarter, and 22 Wall Street analysts are forecasting earnings increases for the next year.
Cybersecurity Stock to Buy: CyberArk Software (CYBR)
CyberArk Software is an Israeli company that provides privileged account security systems to the U.S. and other countries. It has a market cap of $1.5 billion and is expected to grow at double-digit rates for the next five years.
Cybersecurity Stock to Buy: FireEye (FEYE)
FireEye’s stock was recently upgraded by Stephens & Co. and Morgan Stanley to ‘Overweight.’ This $3 billion market cap company provides vector-specific appliance and cloud-based solutions detect and block known and unknown cyberattacks.
Cybersecurity Stock to Buy: Gigamon (GIMO)
Gigamon provides visibility and control of data-in-motion traversing enterprise, federal, and service provider networks (network test equipment) in the United States, rest of Americas, Europe, the Middle East, Africa, and the Asia Pacific. Also one of the smaller ideas, GIMO has a market cap of $1.7 billion, and rumors abound that it is a takeover target. The shares were just upgraded by Dougherty to ‘Buy.’
While it’s very unfortunate—and costly—that cybercrime has escalated to this level, the bright side is that from adversity comes opportunity. And the opportunity is here for investors.
Nancy Zambell, Editor of Wall Street’s Best Investments, has spent 30 years helping investors navigate the minefields of the financial industry. Nancy scours more than 200 advisories and research reports to select the top recommendations, which she collects for you in this easy-to-read digest.Learn More