Cybersecurity is an industry growing fast, with many promising opportunities for investment. As the world becomes more reliant on computers to store, organize and transmit data, the need for cybersecurity platforms that can protect this information is increasing.
This growing necessity spells opportunity for investors interested in cybersecurity investing.
Growing awareness for the cybersecurity industry
Cybersecurity investing is a rapidly expanding global market. In Q1 2017, Cybersecurity Ventures predicted that global spending on security awareness training for employees will reach $10 billion by 2027, proof that the industry is growing quickly and consistently in all directions. And that’s the most under spent sector of the industry. Furthermore, EY’s Global Information Security Survey 2016-17 establishes that a skilled cyber workforce is essential to keep pace with evolving threats. In the power and utilities (P&U) sector, 84 percent of security teams consider careless employees to be the most likely source of an attack and 58 percent rated awareness and training as a high security priority.
Overall, the survey says the route to cyber resilience is to firstly sense, secondly resist and thirdly, react to threats. Sensing and anticipating attacks with threat intelligence is the first step on the road. Then resistance and defense comes in the form of internal audits and controls. Lastly, in the worst case scenario, organizations need a reaction protocol and incident response capabilities for effective damage control. They also need to get back to normal as soon as possible and use it as a learning experience.
Cyber threats are becoming increasingly sophisticated, so companies are having to collaborate and share information with business peers in order to survive. PwC’s Global State of Information Security Survey 2017 reveals that 55 percent of organizations are collaborating with outside partners to improve security and reduce risks.
Trend Micro calls 2016 the Year of Online Extortion, due to the amount of ransomware threats, but expects this to level out a little in 2017. This isn’t cause for celebration though – attack methods and targets will simply diversify. They predict a 25 percent growth in the number of new ransomware families in 2017.
Cybersecurity is quickly becoming an important dimension of every information-oriented sector. According to a report from Homeland Security Research, America’s financial services cybersecurity market size is set to surpass $68 billion by 2020, making it the largest non-government cybersecurity market.
Meanwhile, the healthcare sector is lagging behind in the cybersecurity industry. In fact, Reuters reported in 2014 that the FBI had warned healthcare providers that their cybersecurity systems were vulnerable to hackers: “the healthcare industry is not as resilient to cyber intrusions compared to the financial and retail sectors, therefore the possibility of increased cyber intrusions is likely.” The LA hospital, Hollywood Presbyterian Medical Center, will be wishing they had heeded this warning, as their medical records were hacked last year for a ransom.
Companies to watch in cybersecurity
The clear demand for cybersecurity services makes this market an easy choice for investors. But what are the best ways to become involved in the market?
If a large-cap company is your style, something like Cisco Systems (NASDAQ:CSCO) would be a safe bet. Cisco designs, manufactures and markets products for the information technology industry, providing companies with internet protocol-based services. The company spans the Americas, Europe, the Middle East, Africa, Asia Pacific, Japan and China. Although Cisco merges into sectors well beyond the boundaries of a traditional cybersecurity stock, the products it creates are essential to the success of this industry.
Profiled by Bloomberg, BusinessWeek, The Wall Street Journal and more, FireEye (NASDAQ:FEYE) is another strong example. The company invented a purpose-built, virtual machine-based security platform that provides real-time cyber attack protection to enterprises and governments worldwide; it is proving popular among investors and clients alike. The platform that it produces is used by 3,400 customers in 67 countries, and over half of Fortune 500 companies.
There are also lots of small-cap companies doing innovative things within the cybersecurity space. Through its subsidiaries, Avante Logixx (TSXV:XX) enables personal and commercial security and safety, security monitoring, advanced video analytics, automation and real-time monitoring in various sectors. Its SmartBoxx technology platform offers functionality for applications in both security and other sectors. They have a market cap of $22.81 million.
Meanwhile, VirnetX Holding (NYSEMKT:VHC) is an internet security software and technology company that owns patented technology for secure communications, including 4G LTE security. The company’s products facilitate secure communications, and offer a security platform required by internet-based applications like instant messaging, video streaming and file transfers. VirnetX Holding’s portfolio is centered around securing communications over the internet, with additional applications in the areas of device operating systems and network security for cloud services.
As these companies illustrate, there are lots of opportunities for investors in the area of cybersecurity investing. The real difficulty is choosing which of these many companies is the right investment choice for you.
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This is an updated version of an article first published on Cybersecurity Investing News on July 2, 2015.
Securities Disclosure: I, Emma Harwood, hold no direct investment interest in any company mentioned in this article.