Cybersecurity continues to be one of the fastest-growing market sectors. According to Fortune Business Insights, the global cybersecurity market should grow at a compound annual growth rate (CAGR) of 13.8% between now and 2030.
The current state of play in the cybersecurity sector resembles the race that’s occurring in the artificial intelligence sector. Companies need to keep up with the increasing digitization of information technology networks or risk being left behind.
Remote work and higher customer expectations are two reasons why companies must be on the cutting edge of technology.
But that also opens them up to security threats. One of those threats is coming from AI. The result is that this sector is constantly changing.
With all that said, when you consider buy-and-hold stocks, cybersecurity wouldn’t be the first sector that comes to mind. These are expensive stocks by traditional metrics. However, the entire sector is expensive. That’s the premium that investors are paying for a sector that is forecast to have massive growth.
That means you have to define value differently. Right now, that may mean searching for stocks that are the best in class. And in this article, we look at three of the best cybersecurity stock to hold forever.
|PANW||Palo Alto Networks||$216.79|
|BUG||Global X Cybersecurity ETF||$24.01|
Palo Alto Networks (PANW)
I’ve written about the top cybersecurity stocks for long-term investment frequently. And each time, Palo Alto Networks (NYSE:PANW) tops the list. For a best-in-class stock in this sector, it’s hard to find a better choice.
The cybersecurity giant has a variety of software offerings that gives it essentially an as-a-service model. Approximately 80% of the company’s customers are of the subscriber variety.
In its last quarter, the company reported $8.1 billion in deferred revenue. This is money that the company has collected for services it hasn’t yet delivered. And that’s why many analysts believe the company will meet its lofty growth targets.
That being said, PANW stock is expensive at 174x forward earnings. The stock being up 53% for the year as of this writing and is butting up against its 52-week high. That makes it fair to wonder how much growth is left.
Earnings are expected to grow by 26% in the next year, and if the company hits that target, there will be more growth as well.
When you’re considering the best cybersecurity stocks to hold forever, it’s not a time to be waiting for a company to become profitable.
That’s one reason Fortinet (NASDAQ:FTNT) makes this list. Not only is Fortinet profitable, but it continues to grow earnings on a year-over-year basis. Since earnings growth is one of the best predictors of stock price growth, FTNT is a great choice.
However, there’s another reason to like Fortinet and that gets to how the company makes its money.
Specifically, the company focuses on the data center market, which is a high value target for cyber-thieves. That means companies will make sure they are paying whatever it takes for cybersecurity.
Like Palo Alto Networks, Fortinet is an expensive stock, but it’s not as expensive at “just” 57x forward earnings. FTNT stock is trading near the top of its 52-week range, but the company should have 17% earnings growth for the year.
Global X Cybersecurity ETF (BUG)
Sometimes finding long-term cybersecurity stocks to buy means not looking at one single stock.
That leads me to the last selection on this list, the Global X Cybersecurity ETF (NASDAQ:BUG). This fund gives you exposure to both Palo Alto Networks and Fortinet along with about two dozen other names in the sector.
This is a great way to get diversified exposure in a growing sector. And that exposure comes with a net expense ratio of just 0.50%. Diversification is one of the many benefits of ETFs. However, any ETF is only as good as the fund manager. At any given time, the fund may contain stocks that carry more risk than you may want to carry.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.