I’m still not encouraged by the current state of the national or global economy, and I’m erring on the side of caution when it comes to investing.
But there is one sector that I consider one of the biggest mega-trends in the markets today.
Cybersecurity is one of the biggest issues for us, so it’s also one of the biggest growth opportunities.
According to cyber-security market research firm Cyber Ventures, the cyber-security market should eclipse $1 trillion between 2017 and 2021. That is a market that barely even existed a decade ago.
Many cyber experts are calling Stuxnet, the worm that infiltrated Iran’s nuclear program and which has been linked to the National Security Agency, the A-bomb of cyberwar. It has taken us into a new age of cyber security, espionage and surveillance where the entire web is the battlefield.
More recently, an anonymous hacker collective known as Shadow Brokers snuck into the NSA’s internal-hacker group known as Equation Group and stole the code for Stuxnet and other next-gen malware Duqu and Flame. Then Shadow Brokers published the code.
That means someone hacked the NSA’s most elite group of hackers.
Bottom line: domestically and internationally, no one is safe with current security measures.
That’s certainly an issue that has come up regarding the Russians and whatever they were doing inside the U.S. political system. Ransomware (when someone hacks a computer and holds the data or the servers hostage for a sum) is also ravaging small and mid-sized businesses.
A smart choice
The point is, everyone is doing it. Whether it’s corporate or state espionage, cyber is the new tool to get an edge on your competitors and enemies.
That means the government as well as industry (and individuals) need to be offensive and defensive when looking at cyber security. And this challenge is only going to increase, regardless of other economic issues.
Instead of picking individual stocks in the sector, I say the most conservative ways to play this sector now is the PureFunds ISE Cyber Security ETF (NYSEArca: HACK).
Built to track the ISE Cyber Security Index, it is a great way to take advantage of the “arming” of businesses, governments and individuals.
The index has a good mix of big cyber-security firms and up-and-comers. HACK is up 26 percent in the past 12 months, but that’s just the beginning.
And even if there is a major correction, these stocks won’t feel the damage as much as other sectors. Following is a taste of the companies that make up the fund.
Mantech (NASDAQ: MANT) is a company that keeps a low profile. That’s because it operates on highly sensitive projects for the U.S. intelligence community as well as the Departments of Defense, State, Health and Human Services, Veterans Affairs and Justice as well as the FBI.
Anywhere in the federal government where secure records are a top priority, Mantech is on the job.
It also provides secure networks for the intelligence community so that communications between outposts and command (or Langley to the Afghan hinterlands) can be relayed without threat of hacking.
Symantec (NASDAQ: SYMC) is one of the oldest and largest cyber-security firms in the market and is a major player in the U.S. government’s $19 billion worth of cyber-security platforms. It also owns the Norton brand security programs that are popular with individuals, as well as enterprise solutions for both mobile and computer security.
The federal government’s computer systems are set up on various protocols and security platforms. Some of this is for security purposes but generally it was because each massive department built out its own system and no one was overseeing “the big picture.” Go figure.
Symantec is the go-to player to rationalize this challenge for large organizations and governments.
Palo Alto Networks (NASDAQ: PANW) operates in three divisions: Next-Gen Firewall, Advanced Endpoint Protection and Threat Intelligence Cloud.
The latter division has made headlines since the company’s start by identifying major worms and viruses before some of the other more established players.
It has clients in every sector, both public and private, but has had a tough time recently acquiring new clients because of the slack economy. But this is our advantage.
Qualys (NASDAQ: QLYS) is a cyber-security player in the fast growing cloud sector.
This is where the future of computing will reside and where IoT (the Internet of Things) will grow. Given the enormous corporate interests involved in IoT, it will be extremely important for every link in the cyber-security chain be as strong as the next and Qualys is building a reputation for just that.
And part of the great advantage of buying HACK is you get a pure play cloud security company like Qualys without missing out on other important security sectors.
— GS Early