Cybersecurity Investing Facts

These basic facts will stand investors in good stead prior to investing in cybersecurity.

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Although other years have laid claim to the title, it seems that 2016 was the year of the hack, with Hillary Clinton’s run for presidency undermined by an email hack. Everything is relative and it is more than likely that years to come will assume the title, however undesirable, too. Cybersecurity is, thus, one of the most important industries of our era.

What is cybersecurity?

Cybersecurity processes protect computers, programs and cloud data from interference.

The earliest recorded incident began in 1986, when Brain, the first PC virus, spread via floppy disks. Two years later the Morris worm infected about ten percent of computers with Internet access, numbering around 6,000. In 1992 the Michelangelo virus went viral in every sense; the media reported on it extensively and prompted an “anti-virus industry”. 2010 is seen as the start of the cyberwar era, when SCADA systems were targeted by malicious computer worm Stuxnet.

Nowadays Yahoo! (NASDAQ:YHOO) is the most famously breached company, its data hacked twice, with one announced in September and again in December of 2016. In 2016, there was no shortage of news on cybersecurity. The stakes are a lot higher than they were 30 years before. And now individuals can even be a Luddite with no email account and still be targeted, as shown by the hospital records hack in February. Patient information at Hollywood Presbyterian Medical Center was eventually returned, for the price of $17,000 in bitcoins. No target is too big.

Why is cybersecurity an important and growing market?

The way that we share, store and use data is changing. Cloud migration, mobile computing and third party data storing are the main reasons for the rise in cyberattacks. According to a report by F5 Networks, “growth in mobile and cloud-based applications is seen as significantly affecting application security risk.”

Cyberattacks have graduated from credit card fraud to identity theft and cyber services need to respond accordingly. In order for companies to safeguard their financials, and individuals to retain their privacy, cybersecurity solutions are necessary. These needs continue to drive growth.

In fact, MarketsandMarkets estimates the cybersecurity market size will grow to $202.36 billion by 2021. “The major growth drivers of the market include the rise in security breaches targeting enterprises and need for stringent compliance and regulatory requirements.”

According to Cybersecurity Ventures, the cybersecurity unemployment rate has dropped to zero percent, which really shows the demand. Talent can take their pick out of the 1.5 million cybersecurity job openings forecast by 2019. Cybersecurity Ventures Founder and Editor-In-Chief Steve Morgan, in an email to INN, said that the “biggest challenge for any publicly-traded cyber firm heading into 2017 is scaling its headcount of skilled security personnel”. The US News and World Report ranked a career in information security analysis fifth on its list of Best Technology Jobs.

Who are the biggest cybersecurity companies?

Check Point Software Technologies (NASDAQ:CHKP), Imperva (NYSE:IMPV), Mimecast (NASDAQ:MIME) and Palo Alto Networks (NYSE:PANW) are leading pure-play companies in the sector.

Check Point Software Technologies provides industry-leading solutions that protect customers from cyberattacks. Founded in 1993, they have been around a long time and are one of the most established players.

Imperva are in the business of protecting cloud data. The majority of analysts currently rate them a ‘Buy’ and year-to-date they are already up 0.65 percent.

Mimecast is a cybersecurity firm. They specialize in enterprise information archiving, being named a leader in the 2015 and 2016 Gartner Magic Quadrant for Enterprise Information Archiving.

Palo Alto Networks, a pioneer in network security, are one of the largest cybersecurity companies, with a market cap of $11 billion. They rank consistently on Cybersecurity Ventures’ Cybersecurity 500 list.

How can I invest in cybersecurity?

If investors would rather not invest in specific companies, they can explore a variety of different options. Useful if investors cannot decide whether to invest in hardware or anti-virus programs, diversifying investments exposes investors to all the strands of the industry:

  • ETF

The HACK ETF (NYSEARCA:HACK), from PureFunds, an innovator of thematic ETFs, has risen so far in 2017. This upwards trajectory is building on a year’s gain of 17.81 percent. It is the world’s first cybersecurity ETF.

The First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR) performs in general slightly better than HACK, when comparing them on an interactive chart, though it has a smaller market cap. This has been reversed in 2017, with HACK outperforming CIBR.

  • Index

The BVP Cyber Index is a constant high performer and was indexed as of January 2011. It features 29 publicly traded cyber companies, such as Absolute Software (TSX:ABT) and Barracuda Networks (NYSE:CUDA).

The NASDAQ CTA Cybersecurity Index (INDEXNASDAQ:NQCYBR) has performed well so far this year. Quoting the fact sheet, the “index includes companies primarily involved in the building, implementation and management of security protocols applied to private and public networks, computers and mobile devices”.

Even if it falls, indices are a less risky way to invest as the stronger stocks act as shock absorbers for others’ downturns.

Don’t forget to follow us @INN_Technology for real-time news updates! 

Securities Disclosure: I, Emma Harwood, hold no direct investment interest in any company mentioned in this article. 

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