A surge in cybercrime during lockdowns … a trend that will only grow from here … why a cybersecurity ETF may not be the best way to go … Louis Navellier’s top pick
Was yesterday’s selloff the start of something much worse?
The tech sector, which has been soaring in recent months, finally rolled over, leading to a decline of nearly 5% in the Nasdaq.
Many of today’s market darlings were hammered, including Tesla, down 9% … Apple down 8% … and Microsoft down 6%.
The question suddenly on everyone’s mind: “Is this the start of something much bigger?”
No, says famed investor, Louis Navellier.
From his flash alert to Platinum Growth Club subscribers yesterday:
After reaching new record highs, the stock market pulled back sharply …
… it’s important to note that the selling volume across the board is light. That’s a positive sign, folks. If volume was high, it would signal a selling panic. But because selling volume is light it means that we’re simply seeing some profit-taking.
The reality is Wall Street has gone on vacation ahead of the long Labor Day weekend, and much of Europe remains on holiday. So, there are a lot of folks travelling.
In addition, professional traders like to clean out their inventory before the holiday weekend. Couple this with a four-day trading week next week, and I expect more light trading in the near-term …
Given these factors, I encourage you not to worry right now.
Instead, I recommend you take advantage of any near-term weakness to buy our fundamentally superior stocks on dips.
As I write Friday morning, the selling pressure is continuing, with the Nasdaq down almost another 4%.
But given Louis’ admonition that we shouldn’t put too much weight behind this selloff, let’s hold judgment until we see how next week shapes up.
Instead, today, let’s turn toward a specific sector Louis is bullish on.
To lead us in, let me start with a personal story …
***Three months ago, a hacker tried to extort me
They wanted bitcoin, or else …
I wasn’t singled out. There were likely thousands just like me — perhaps far more.
In short, thanks to one of the countless corporate data breaches over the last few years, a hacking individual or group accessed one of my old passwords.
One afternoon, I’m on my computer and a menacing email hits my inbox …
Revealing my old password, the email informs me that “as you can see,” they’ve hacked me and gotten access to my computer and personal information. They “know a lot about me” beyond my password.
In short, the hacker(s) wanted bitcoin in exchange for alleged, compromising information.
Fortunately, I change passwords relatively often — the one they had was from a while ago. So, I knew the hackers were taking a stab in the dark.
I deleted the email and nothing happened.
I’m one of the lucky ones.
***The FBI has found a 300% increase in reported cybercrimes since March
Apparently, hackers stuck at home during lockdowns have channeled their boredom into increased cybercrime.
A few recent statistics, updated for 2020, from Fintech News:
- 80% of firms have seen an increase in cyberattacks
- Cloud based attacks rose 630% between January and April 2020
- Phishing attempts rose 600% since end of February
- Apple accounted for 10% of branded phishing attempts in Q1 2020
- Ransomware attacks rose 148% in March
- Average ransomware payment rose 33% to $111,605, compared to Q4 2019
Keep in mind, these statistics are building off a 2019 that was so bad that security and anti-virus company, Emsisoft, called it an “unprecedented and unrelenting barrage of ransomware attacks.”
Here in the Digest, we covered a few of those attacks, including Lake City and Riviera Beach, both in Florida. The two cities paid out a combined $1 million to hackers after attacks froze city operations.
The city of Baltimore also was 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.
***Aligning your portfolio with the companies defending us against these attacks
Over the coming decades, as our lives grow increasingly intertwined with all things “tech,” hackers will find new ways to use our technological advancements against us.
While this isn’t something any of us wants, it does serve as a huge tailwind for the growth of the cybersecurity industry. In fact, its growth is inevitable.
Here’s how famed investor, Louis Navellier, described 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 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.
Below, you can see HACK outperforming the S&P by more than 160% here in 2020.
Two drawbacks to HACK, however.
First, it comes with an expense ratio of 0.60%. While this might not seem like much, over time it significantly erodes your returns.
Second, HACK spreads your invested dollars over more than 50 different cybersecurity stocks. That means you get exposure to the strongest ones, but you’ll also get exposure to the vulnerable ones, which will drag down your returns.
Take a former recommendation of Louis’ — CyberArk (CYBR). It’s one of HACK’s top-15 holdings by weighting.
While Louis was bullish on CYBR some quarters ago, its earnings didn’t measure up earlier this spring.
Noting an anticipated earnings decline, Louis recommended his subscribers lock-in their 24% gains and move on.
So, what’s happened with CyberArk since the recommended sell-date on May 8?
As you can see below, it’s lost 5% while the S&P has climbed 18%.
And as for HACK during that same period, it climbed just 10%. Clearly CYBR’s underwhelming performance has dragged down HACK’s overall return.
***So, how might an investor have avoided CyberArk?
Regular Digest readers know the answer. You could use 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:
As you can see from this “C” grade, it’s no wonder CyberArk hasn’t been performing better.
It also points toward an important takeaway …
Just because the cybersecurity sector is “inevitable” doesn’t mean all of its companies will perform well. Use Louis’ Portfolio Grader to help you separate the good from the bad.
Louis has found a different cybersecurity stock that he’s far more excited about today
From Louis’ recent issue of Market 360:
There are a lot of cybersecurity companies out there now, but as an investor, I am only interested in the creme de la creme of cybersecurity. The good news is I’ve found the one that will be companies’ go-to to protect themselves from hackers. 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 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 64% since my initial recommendation in Growth Investor in August 2018, and its fundamentals remain strong today. In fact, it reported double-digit year-over-year earnings and sales growth in the most-recent quarter. So, I expect this stock to keep moving higher well into next year.
If you’d like to learn more about this stock as one of Louis’ Growth Investor subscribers, click here.
At a minimum, take a look at the cybersecurity sector. Perhaps run the specific companies in HACK through Louis’ Portfolio Grader to help you refine your search.
Bottom line — there’s a cyberattack every 39 seconds. Clearly, this “inevitable” sector isn’t going anywhere. But rather than be victimized by it, let’s use this as a tailwind for portfolio gains over the coming years.
Have a good evening,