With these 10 best cybersecurity stocks to buy now, the world of “cybersec” could mean to you a lot more than just your data and privacy or cascading green letters on a black background. It could also mean a sizeable profit.
As our world grows more self-isolated, the digital becomes an ever-present part of our lives. Clicking away carelessly, you not only expose your sensitive data to potential malicious actors, but you could be putting your finances, family or even workplace at risk.
This is where the booming world of cyber security steps up. Be it at home, in the office or even walking around your local park, as long as you’re online, you are already interacting with a firewall, some monitoring software, data leakage protection solutions, etc. All these means of protection come at a price that gets steeper the more competitive the market becomes. So much so, that the cyber security market size was estimated in value at $149.67 billion in 2019 and is expected to reach $304.91 billion by 2027, growing at a CAGR of 9.4% from 2020 to 2027.
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With blockchain, IoT and the digitalisation of every service imaginable, the need for sophisticated, multi-layered security solutions will keep growing at an increasing rate. What is even better is that according to Gartner – a leading technology market researcher – the cybersecurity market remains at a steady growth even in these COVID-stricken days. Before curfews, lockdowns and mask wearing became a part of our daily lives, the market was expected to grow 7.8% by the end of 2020. As expected, once the wave of socio-economic measures caused other markets to crash and burn, this one powered through with a moderate slowdown in growth but still achieved an increase of 2.4%. This makes it a viable option for investment as it is expected to not only recover, but get a boost as the world slowly gets back up to speed.
Cyber security can influence the stock market too. In the past few years we’ve seen huge breaches in companies like Sony, Target, Microsoft and many more. They promptly caused their stocks to sink and were usually followed by a proportional lawsuit. Just recently, FireEye (FEYE) – one of the security industry giants who ironically was involved in investigating the aforementioned breaches, fell victim to a breach in its own security. The disclosure of the attack caused their shares to drop 7% instantly in after hours trading.
So, what are the best cybersecurity stocks to buy now? We started with Global X Cybersecurity ETF’s (BUG) holdings to identify the leading cybersecurity stocks. The Global X’s ETF didn’t include Cloudflare (NET), so we also added Cloudflare as a potential candidate. Overall, there were 29 stocks in our initial list. Then we ranked all of these 29 stocks using Insider Monkey’s hedge fund sentiment data and identified the top 10 cybersecurity stocks among hedge funds.
Our research has shown that hedge fund sentiment data is a very useful way of identifying stocks with huge upside potential. We have been recommending a portfolio of 12-20 stocks (using hedge fund sentiment data in our selection process) in our premium monthly newsletter since March 2017. Our diversified portfolio of stock picks returned 145% since March 2017, vs. 67% gain for the S&P 500 ETFs. You can download a free sample issue here. Since hedge fund sentiment data was helpful in identifying market beating stocks, we decided to use this data to identify the best cybersecurity stocks to buy now.
With a focus on vendors and R&D, powered by the ever increasing use of mobile devices and with some of the biggest players in the tech world coming onboard, here are the 10 best cybersecurity stocks to buy now as rated by InsiderMonkey.
10. Sailpoint (NASDAQ: SAIL)
No. of hedge funds: 29
Total value of hedge fund holdings: $766 million
Sailpoint is an identity and access governance solutions provider for the enterprise world. It provides pre-packaged software solutions to industries where high-risk sensitive data is frequently handled (government, healthcare, education). This allows them to tackle the challenge of making sure your data doesn’t fall into the wrong hands.
The company has been on the market since 2017 when it held its IPO, valued over $1 billion. To add to that, it currently holds the Gartner Peer Insights 2020 Customers’ Choice title for identity governance and administration (IGA). Gil Simon’s SoMa Equity Partners owns the largest position in SAIL among the 800 hedge funds tracked by Insider Monkey.
9. Varonis Systems Inc (NASDAQ: VRNS)
No. of hedge funds: 29
Total value of hedge fund holdings: $528 million
Varonis ranks 9th in our list of the 10 best cybersecurity stocks to buy now. Varonis is a company that provides managed threat detection and response solutions based on custom-tailoring monitoring processes to your business. This means their solutions will study and identify the relations between a company’s employees, internal and external processes and communication and detect any abnormal behavior.
This year has marked a moderate growth for Varonis, being on an all time high number of hedge fund portfolios with bullish positions at the end of Q2. To add to that, it has nearly doubled its market cap and enterprise value since the end of March this year.
8. Tenable Holdings Inc (NASDAQ: TENB)
No. of hedge funds: 30
Total value of hedge fund holdings: $490 million
Tenable Holdings, through its subsidiaries and through the Tenable brand, offers vulnerability management solutions which let people map out their entire business’ infrastructure and its weaknesses – from the least important connected device to the operation’s backbone.
In 2019 Tenable held the largest market share in its area of operation with 27.6%, according to the International Data Corporation – one of the leading global market researchers. This year sees Tenable keep its strong positions on the market, and an increase in hedge funds with investments in the company, recovering from a slight drop in the 3rd quarter of this year.
7. NortonLifeLock (NASDAQ: NLOK)
No. of hedge funds: 34
Total value of hedge fund holdings: $1.05 billion
NortonLifeLock ranks 7th in our list of the 10 best cybersecurity stocks to buy now. Norton, a well-known and recognized giant in the tech world has a portfolio that most of us have interacted with at some point in our lives. Be it home antivirus or enterprise solutions, NortonLifeLock seems to have it all. What it lacks this year, though, is strong hedge fund interest.
Hedge funds tracked by Insider Monkey with investment in NLOK have dropped from 37 during this year’s second quarter to 34 currently. The company is not the most popular stock in its group but hedge fund interest is still above average. Activist hedge fund Starboard had a $500 million position in NLOK at the end of June, but they cut this position by half during the third quarter.
6. Fortinet (NASDAQ: FTNT)
No. of hedge funds: 36
Total value of hedge fund holdings: $1.29 billion
To everyone in the cybersec world, Fortinet is known as an all-time enterprise favorite distributor of both hardware networking solutions and software endpoint and cloud protection. The company has a strong presence on the market with the third largest share, according to Gartner.
This year saw Fortinet measure its all-time high number of investing hedge funds, being found on the portfolios of 44 funds. Since then it has lost some of these positions but the company keeps increasing earnings stronger than predictions and gaining new markets so it’s sure to come back up soon.
5. Proofpoint Inc (NASDAQ: PFPT)
No. of hedge funds: 37
Total value of hedge fund holdings: $489 million
Proofpoint was founded in 2002 as an e-mail security company but it has since expanded its business to fit the needs of a modern office. This means outbound data loss protection, social media coverage and various other vulnerable spots that could allow the wrong people to access your data.
Insider Monkey spotted the company on 34 hedge fund portfolios, a number that has since then increased to 37, seeing Proofpoint Inc getting increased investor attention. Financially, the company has been a strong performer, beating all predictions and pulling consistently strong numbers for the past four years.
4. Couldflare (NYSE: NET)
No. of hedge funds: 44
Total value of hedge fund holdings: $537 million
Cloudflare is a leader in edge computing. It handles a good part of the traffic the average consumer goes through online today. With services such as DDoS mitigation and internet security, it acts like a reverse proxy between you and the websites you visit.
Aside from establishing itself as an internet power, Cloudflare had its IPO on the New York Stock Exchange just last year. This year it has been one of the best-performing US stocks, currently being found on 44 hedge fund portfolios, way above its all time high of 33.
3. Okta Inc. (NASDAQ: OKTA)
No. of hedge funds: 51
Total value of hedge fund holdings: $187 billion
Okta provides identity authentication services. This means building a way to verify and enforce who accesses what at any given time, from your run-of-the-mill passwords to biometrics. Okta has been a strong up-and-comer since last year it almost doubled its revenue and beat analysts’ predictions by some $11 million.
Starting with a mainly SMB-oriented client pool, Okta has since leveled up to serving over 1400 enterprises with revenue over $100 000 out of 8000 reported clients. This number continues to grow rapidly.
2. Palo Alto Networks Inc. (NASDAQ: PANW)
No. of hedge funds: 59
Total value of hedge fund holdings: $319 billion
Palo Alto Networks is a giant when it comes to providing firewalls and various cloud-based services to extend the functionalities of these firewalls. They have a multinational market, outperforming even Cisco in this year’s second quarter.
Equally, when it comes to trading, the number of bullish hedge fund positions moved up by 8 in recent months. The company was in 59 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 52. This means the bullish number of hedge fund positions in this stock currently sits at its all time high.
1.Crowdstrike Holdings Inc. (NASDAQ: CRWD)
No. of hedge funds: 71
Total value of hedge fund holdings: $430 billion
Crowdstrike provides a broad spectrum of solutions with their main aim being intrusion and breach prevention, such as some of the breaches they helped investigate – high-profile cases such as Sony Pictures and the DNC.
Recently, in similar stocks to CRWD, the average amount invested in these stocks was $1223 million with an average of 41.9 hedge funds. In Crowdstrike’s case this number is way higher at $4301 million, even though it has experienced a slight decrease from its previous appearance on 78 hedge funds portfolios. However, Crowdstrike’s stock returns recently outperform predictions by a sizable margin which explains why hedge funds pile into it, compared to stocks with similar market returns.
Please also see 10 Best Cloud Stocks To Buy Now and 10 Best Artificial Intelligence Stocks To Buy
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This article is originally published at Insider Monkey.