1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Adam Lawrence
Adam Lawrence
Articles (28) 

The New Battleground: Cyber Warfare

Is opportunity presenting itself to investors?

If you live in the U.S. and have turned on the television, you’re going to be seeing a lot on the presidential debates. In particular, Republican nominee Donald Trump continues to echo the sentiment that China and Russia could be behind some of the largest security breaches we’ve seen.

As recently as last week, it was revealed that Yahoo’s (YHOO) servers had been breached with the result of hundreds of millions of user records being released across the dark web. The biggest point on the long list of threats was the fact that the breach was thought to have been state sponsored.

Earlier in the year there were several accusations that China’s “cyber spies” hacked workstations and servers of the Federal Deposit Insurance Corporation (FDIC). But it doesn’t just stop with hacks on government organizations of large public companies like Yahoo. This is the direction technology is taking us right now. At this very moment Google, Uber and automakers like Ford (NYSE:F) and Tesla (NASDAQ:TSLA) are working on building self-driving vehicles.

Major infrastructures will be needed not only on board but also with the simple notion of the connected vehicle to parent servers. A hack to the mainframe of any of these companies could wreak havoc not only on the organizations themselves but from those potentially harmed in the fallout of the hack.

And a lot has come to light on cyber awareness in more recent months. For instance earlier this year the U.S. Department of Justice found that there was a hack on the control systems of a small dam in New York in 2013. And with more “smart things” in our lives like applications for a Smart Home, those choosing to go to Home Depot (NYSE:HD) and purchase a Honeywell (NYSE:HON) thermostat should investigate the fail-safes built in so that they are not at great risk of an actual breach.

Recently Honeywell has been working on its own services to address the growing need to address cyber threats via Honeywell Process Solutions. In essence the system works to control all access originating from outside of a location’s control environment. It also manages things like firewalls and updates and offers enhanced monitoring applications.

Obviously Honeywell is not just an access management company so investors would see limited exposure to the overall industry. Other options could be centered around actual access management companies in particular. Despite a recent spat of bearish pressures, Cyberark Software (NASDAQ:CYBR) has been in an uptrend since February. The company focuses specifically on "privileged access management" designed to protect, manage and monitor privileged accounts. It’s been shown that many large hacks can originate with privileged or higher level accounts – the ones that have control over larger networks of smaller user-bases.

Other organizations like IDDriven Inc. (IDDR) focus on the entire access management framework. The management’s previous successes in building a management software that ended up getting sold to Microsoft (NASDAQ:MSFT) helps in the experience department. IDDriven’s platform is built to combat typical access right tasks but also allows for geo- and zone-based management. In the mobile environment, connected devices can bring another layer of risk for networks where IDDriven’s software is dynamic enough to allow users access whether in a brick-and-mortar location or when working virtually.

In more recent news, Palo Alto Networks (NYSE:PANW) continues to trend off its latest earnings and beat street estimates for revenue, which outpaced analyst consensus by roughly $10 million (Palo Alto reported $400.8 million; analysts projected $389.9 million) is another security company that addresses cyber threats and offers firewall technology, end-point protection and its “Threat Intelligence Cloud.” In terms of exposure to cyber security, Palo Alto is one of the bigger companies in the space dealing specifically with cyber threat remediation. Hedge funds like Vanguard Group and Jennison Associates have increased their stakes in the technology company in recent weeks. Despite stumbling to lows in June, the stock itself has been on a consistent climb ever since.

No matter the case, the more connected and digital our personal and business lifestyles become, there is a new breed of warfare that has begun to grow more prevalent in recent years. Yahoo’s exposure to its mega threat, for instance, on top of several potential threats to the Democratic National Committee are just a few more recent examples of the growing threat. To this end we’ve observed that cyber security stocks continue to benefit.

In fact PureFunds ISE Cyber Security ETF (HACK) has been gaining even more momentum in the wake of Yahoo’s breach. Since Sept. 15, the ETF is up more than $1 per share, closing in on a new 52-week high. The price of First Trust Nasdaq Cybersecurity ETF (NASDAQ:CIBR) actually continues to post new 52-week highs this month and with heightening concerns of when (not if) the next breach will occur, this is quickly becoming a space for many investors to point their focus

Disclosure: The author owns 2,200 shares in IDDriven Inc. and no other companies mentioned in this article.

Start a free seven-day trialof Premium Membership to GuruFocus.

Rating: 3.0/5 (2 votes)



Please leave your comment:

Performances of the stocks mentioned by Adam Lawrence

User Generated Screeners

pascal.van.garsseHigh FCF-M2
kosalmmuseBest one1
DBrizanall 2019Feb26
kosalmmuseBest one
DBrizanall 2019Feb25
MsDale*52-Week Low
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat