Home Depot Data Breach Makes Another Bullish Case for Cybersecurity

Guild Investment Management  |

Earlier this month, Home Depot (HD) revealed a massive data breach, in which the credit cards of some 56 million customers may have been compromised. Company insiders have since alleged lax cybersecurity practices, but it’s also clear that the attack was performed by extremely sophisticated and capable thieves – probably based in Eastern Europe (according to analysts).

Home Depot’s stock has not yet fallen as much as Target’s (TGT) did after last year’s Christmas breach -- perhaps because there are fewer retail alternatives to the home goods titan.

This event will put corporate America -- and Europe -- on alert once again that their enemies are going to be constantly increasing their capabilities, and therefore that constant vigilance is necessary. And with criminals approaching the capacity of “state-level” actors -- or actually with covert state backing -- we think that U.S. government policy is likely to become more supportive. In short, we view every event like the Home Depot breach -- and there will certainly be more -- as an argument supportive of investing in cybersecurity firms.

Below are some of the cybersecurity companies that we have been following. They include hardware, software, network, and cloud security providers. Note: We do not recommend any of these stocks for purchase at this time, but if we get a stock market correction of 5-8%, it may encourage us to look closely at some of them.

Small firms include Barracuda Networks, Inc. (CUDA) ; Imperva, Inc. (IMPV) ; Qualys, Inc. (QLYS) ; Proofpoint, Inc (PFPT) ; KEYW Holding (KEYW) ; Radware Ltd (RDWR) ; and FireEye, Inc (FEYE) . Mid-size firms include Palo Alto Networks, Inc (PANW) ; Fortinet, Inc (FTNT) ; and F5 Networks, Inc (FFIV) .

Large firms include Symantec Corporation (SYMC) , Check Point Software Technologies, Ltd (CHKP) ; and Juniper Networks, Inc (JNPR) . Investors could also seek exposure to this theme through large, established firms such as Cisco Systems, Inc. (CSCO) , as well as defense firms with significant cybersecurity divisions, such as L-3 Communications (LLL) , Exelis (XLS) , Raytheon (RTN) , French firm Thales SA (which trades in Paris under the symbol HO), and other defense and aerospace majors.

We believe that cybersecurity is a solid long-term theme for investors with a long view and the patience to endure the volatility that can characterize stocks in emerging tech fields. These stocks can tend to be very richly valued on a fundamental basis, so investors should perform their due diligence and wait for a market correction to enter the group.

Investment implications: Spending on cybersecurity is in a secular uptrend. However, industry valuations are often extremely high, and stocks are volatile. We plan to buy some of them on price declines.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
PANW Palo Alto Networks Inc. 205.00 -4.20 -2.01 3,014,469 Trade
RTN Raytheon Company 195.92 3.66 1.90 1,753,491 Trade
TGT Target Corporation 85.81 1.21 1.43 2,691,916 Trade
SYMC Symantec Corporation 20.66 0.88 4.45 11,459,735 Trade
CSCO Cisco Systems Inc. 45.82 1.15 2.57 22,680,195 Trade
IMPV Imperva Inc. 55.36 0.01 0.02 1,434,121 Trade
FEYE FireEye Inc. 17.81 0.88 5.20 7,794,946 Trade
LLL L3 Technologies Inc. 220.80 -0.11 -0.05 1,584,123 Trade
JNPR Juniper Networks Inc. 28.56 0.79 2.84 3,683,957 Trade
FTNT Fortinet Inc. 82.71 2.56 3.19 2,239,252 Trade
HD Home Depot Inc. (The) 193.58 2.41 1.26 4,070,247 Trade
CHKP Check Point Software Technologies Ltd. 113.30 2.19 1.97 1,543,461 Trade
KEYW The KEYW Holding Corporation 8.60 0.30 3.61 215,641 Trade
QLYS Qualys Inc. 75.68 3.28 4.53 273,387 Trade
RDWR Radware Ltd. 23.44 0.67 2.94 176,823 Trade
PFPT Proofpoint Inc. 105.81 4.86 4.81 1,064,824 Trade
FFIV F5 Networks Inc. 169.67 2.67 1.60 988,470 Trade

Comments

Emerging Growth

Alliance Growers Corp

Alliance Growers Corp is a Canada based diversified cannabis company. The company is primarily focused on the development of Cannabis Botany Centres in Canada.