Cybersecurity attacks are only increasing in number and sophistication … how investors should respond to this megatrend
Last week, New Orleans declared a state of emergency, but this time it had nothing to do with a hurricane or weather event.
It was due to a crippling cyberattack.
It began last Friday, when “suspicious activity was detected on the City’s network,” according to the City of New Orleans’ emergency preparedness campaign, NOLA Ready.
The city’s IT department gave the order for all employees to power down computers and disconnect from Wi-Fi. Shortly thereafter, Mayor LaToya Cantrell confirmed it was a ransomware attack.
Officials are remaining relatively tight-lipped, but investigators have identified the likely weapon: Ryuk, a virulent type of “ransomware” that locks up computer data until the victim pays for the key to release the system, usually demanded in bitcoin.
Given that Ryuk was the attack mechanism, experts suggest the malware had been spreading across the city’s computer system, most likely for weeks or months, scooping up sensitive data before someone decided to launch the attack and freeze the entire system.
As I write, Mayor Cantrell’s office is declining to answer most questions, including whether any data has been stolen.
***This is just one of many cyberattacks this year
Lake City and Riviera Beach, both in Florida, have acknowledged paying out a combined $1 million to hackers earlier in 2019, after similar attacks froze city operations.
This past May, the city of Baltimore’s servers were attacked by a strain of ransomware known as RobbinHood. The hackers demanded $76,000. Baltimore city officials refused to pay, but restoring the system cost the municipality an estimated $18 million.
According to security and anti-virus company Emisoft, in 2019, the U.S. faced an “unprecedented and unrelenting barrage of ransomware attacks.” The study from Emisoft found that 103 state and municipal governments and agencies were hit this year. But it didn’t stop there. Other victims included 759 healthcare providers and 86 universities, colleges, and school districts.
The problem isn’t getting better …
Juniper Research estimates that by 2023, cybercriminals are estimated to steal 33 billion records. This is a 175% increase from the 12 billion records stolen in 2018. And Cybersecurity Ventures predicts that global cybercrime will cost upwards of $6 trillion (that’s trillion with a “T”) annually by 2021. That’s up from $3 trillion in 2015.
***Finding the silver lining in the attacks
Over the coming decades, as our lives grow increasingly intertwined with all things “tech,” criminals will find new ways to use our technological advancements against us.
While that’s regrettable, it does serve as a massive tailwind for the growth of the cybersecurity industry. In fact, its growth is inevitable.
Here’s how famed investor, Louis Navellier, describes this:
When it comes to making great investments, few stocks can match the power of “inevitables.””Inevitables” is a concept popularized by legendary investor Warren Buffett.
It’s his term for big companies that dominate their industries. The companies have such well entrenched and well defended spots in the marketplace that their continued success and customer loyalty is virtually inevitable. This makes “inevitables” excellent long-term investments that allow you to make big money while still sleeping well at night …
I love to invest in massive business trends that are so entrenched … have such bright futures … and such guaranteed future demand that strong growth is “inevitable” … virtually guaranteed.
That’s why I believe investing in the top cybersecurity stocks is one of the best financial decisions you can possibly make right now.
***So, how can you play this?
If you want broad-broad exposure to the entire industry, check out the ETF, HACK.
It holds many of the top names in cybersecurity — Cisco, Symantec, Palo Alto, and FireEye, for example.
As you can see below, it’s trading just beneath its all-time.
If you’re looking for a specific cybersecurity company, one of Louis’ top performers is CyberArk.
Here’s how Louis described the company when he recommended it to subscribers:
CyberArk is leading the charge to protect businesses against cyberattacks. The company provides privileged access security, which protects a business’ assets, data and infrastructure in the cloud, development pipeline and in-house. It’s a complete security solution that allows CyberArk Software’s customers to prevent cyberattacks, not just react to them.
As a result, CyberArk Software’s security solutions are in top demand. About half of the Fortune 500 and more than 30% of the Global 2000 turn to CyberArk to protect their business against malicious cyber attacks. The company partners with more than 4,200 businesses around the world, and it has offices in the U.S., U.K., Europe and the Asia-Pacific.
Regular Digest readers know about Louis’ free “Portfolio Grader” tool. It’s a fantastic way to get a fast snapshot of the fundamental quality of a specific stock. It’s rooted in Louis’ objective, numbers-based approach to the markets.
Here’s how CyberArk looks today viewed through the Portfolio Grader:
Louis’ Accelerated Profits subscribers are up 65%, with more gains likely. If you want to initiate a new position, CyberArk is still trading beneath its buy-up-to price.
***CyberArk isn’t the only cybersecurity stock Louis likes today
On Tuesday, he described one of his favorite cyber-plays to his Navellier Growth subscribers:
At the end of the day, the best defense for cyberattacks is a good offense. In this case, that offense is buying the right cybersecurity software. And the companies that make the best of the best will be the cyber go-tos for investors.
There is one cybersecurity company that is one of those go-tos. It provides unified security solutions that can be deployed over digital networks to protect users against malware, spam and network intrusions. And it uses artificial intelligence (A.I.) to analyze over 100 billion security events to help stay ahead of potential cybersecurity threats. This gives it a major advantage over competitors.
The stock is up 50% year-to-date, hit a brand-new 52-week high just yesterday and continues to showcase excellent earnings and sales growth. So, I expect this stock to keep moving higher well into next year.
Now, digressing for just a moment, between the stock just described, CyberArk, and the overall growth potential of the sector, investors might believe that any cybersecurity company has a bright future. Unfortunately, that’s not the case — caution is still needed.
For example, in the Digest on September 26, we featured content from Louis explaining that not every stock in the sector was a great buy. Louis highlighted the stock F5 Networks (FFIV) as an example.
… in 2009 and 2010, F5 Networks was one of the hottest stocks around — up nearly 560%! Then it had some ups and downs on its way to an all-time high in late 2018.
Now for 2019 to date, it’s down 14%, versus a 20% gain for the rest of the S&P 500.
With a high-quality stock, that would be a great opportunity to go bargain-hunting …
Louis went on to explain how FFIV was not a high-quality stock, illustrating that by running it through his Portfolio Grader. His advice was that investors should steer clear.
And so, how has FFIV performed compared with Louis’ just-referenced pick since that 9/26 Digest date?
As you can see below, FFIV has gone nowhere, while Louis’ pick has soared nearly 37%.
Just because the cybersecurity sector is growing doesn’t mean all of its companies will perform well. Use Louis’ Portfolio Grader to help you separate the good from the bad.
For more from Louis in his newsletter Accelerated Profits, including which cybersecurity high-flier is behind these big returns, click here.
In any case, take a look at cybersecurity — this “inevitable” sector has a bright future … unfortunately.
Have a good evening,
Jeff Remsburg
