Home Depot Data Breach Makes Another Bullish Case for Cybersecurity

Guild Investment Management |

cybersecurity stocks, investing in cybersecurity stocks, home depot hack, icloud celebrity hack

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. 130.07 -0.57 -0.44 1,014,714
RTN Raytheon Company 146.30 0.14 0.10 2,080,451
CUDA Barracuda Networks Inc. 22.89 -0.40 -1.72 262,347
TGT Target Corporation 77.39 -0.45 -0.58 4,047,724
SYMC Symantec Corporation 24.82 0.26 1.06 9,532,839
CSCO Cisco Systems Inc. 30.06 0.11 0.37 21,358,288
IMPV Imperva Inc. 37.80 -0.30 -0.79 296,602
FEYE FireEye Inc. 13.69 -0.15 -1.08 2,548,576
LLL L-3 Communications Holdings Inc. 158.45 0.14 0.09 676,711
JNPR Juniper Networks Inc. 28.46 -0.20 -0.70 3,259,438
FTNT Fortinet Inc. 30.69 0.13 0.43 1,359,798
HD Home Depot Inc. (The) 133.39 0.86 0.65 5,174,512
CHKP Check Point Software Technologies Ltd. 85.22 0.63 0.74 844,907
KEYW The KEYW Holding Corporation 13.14 -0.17 -1.28 156,477
QLYS Qualys Inc. 33.00 -0.40 -1.20 155,177
RDWR Radware Ltd. 13.80 0.08 0.58 185,179
PFPT Proofpoint Inc. 72.26 -2.56 -3.42 463,299
FFIV F5 Networks Inc. 142.54 -0.29 -0.20 416,468

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