In the wake of the WannaCry cyberattack, investors are wondering which cybersecurity stocks to buy. Since the attack originated from instruments created by the U.S. government and President Trump has already shown that he is quite earnest about preventing cyberattacks, it’s a good bet that the U.S. government will spend billions of dollars on cybersecurity going forward.
Meanwhile, two other cybersecurity stocks to buy in the wake of the WannaCry attack are Proofpoint Inc (NASDAQ:PFPT) and Barracuda Networks Inc (NYSE:CUDA). The WannaCry attack is conveyed to enterprises via e-mail and Proofpoint focuses on e-mail security.
Finally, since the attack exploited vulnerabilities within the Microsoft Corporation (NASDAQ:MSFT) operating system, which is used by millions of small-and-medium businesses, tens of thousands of those companies will be looking to enhance their IT security.
To benefit from that trend, the aforementioned four companies are the best stocks to buy. Let me explain:
Cybersecurity Stocks to Buy: Booz Allen Hamilton (BAH)
Catalyst: Government Spending
Booz Allen Hamilton is not one of the names that most investors think of when they are looking for good cybersecurity stocks to buy.
But BAH actually gets many valuable cybersecurity deals from the federal government, so BAH stock is likely to get a major boost from the government’s increased focus on cybersecurity. Moreover, its valuation is quite reasonable and lower than many cybersecurity stocks.
In July 2016, Booz Allen was selected by the federal government to provide “mission support services” as part of a $460 million cybersecurity contract. In March 2016, it was named a prime awardee of a $5 billion, five-year deal with the Department of Defense that was “focused on cybersecurity and information systems support.”
Clearly, BAH is poised to benefit greatly from the executive order’s directive to prioritize IT security and from the increased urgency regarding IT security in the wake of the WannaCry attack.
Moreover, the valuation of BAH stock is quite reasonable. Its forward price-earnings ratio is just 19.39, versus 36 for Fortinet Inc (NASDAQ:FTNT) and 37.5 for Palo Alto.
Cybersecurity Stocks to Buy: Palo Alto (PANW)
Catalyst: Government Cloud Use
President Trump’s executive order calls on the federal government to “show preference in their procurement” for the cloud.
The cloud needs to be secured, however, and PANW is certainly well-positioned to benefit from any steps that the government takes to secure the cloud.
As I noted in this Seeking Alpha column, two of Palo Alto’s key products appear to be geared toward providing cloud security.
Its VM-Series next generation firewall can be used to secure public and private clouds, while Aperture protects information “in cloud-based, software as a service products.”
Cybersecurity Stocks to Buy: Proofpoint (PFPT)
Catalyst: Email Defense
Since attacks like WannaCry are typically launched via e-mail, Proofpoint will probably benefit from the attack as PFPT has an elaborate “e-mail fraud defense” system.
Its system has received rave reviews from users that were verified by well-known technology research firm Gartner. “The solution catches an incredible amount of unwanted email and the targeted threat protection is valuable in catching targeted campaigns,” wrote the Chief Information Security Office of a retail company.
“Since we have implemented this solution we have reduced security incidents by nearly 100%,” wrote a manager in the manufacturing sector.
Cybersecurity Stocks to Buy: Barracuda (CUDA)
Finally, Barracuda specializes in providing “data protection and security products for small and medium businesses.” CUDA also has specific solution targeted at Office 365, Microsoft’s cloud product and is a Microsoft partner.
As mentioned above, considering WannaCry’s targeting of Microsoft, many thousands of small-and-medium businesses that use the operating system, but may not have devoted much time and effort to IT security in the past will probably start to do so now. CUDA will definitely benefit from this trend.
The close links of BAH to the federal government, Palo Alto’s cloud security products, Proofpoint’s e-mail defense systems and Barracuda’s products for small-and-medium business make them the best cybersecurity stocks to buy in the wake of the WannaCry attack.
As of this writing, Larry Ramer did not hold a position in any of the aforementioned securities.