As I noted yesterday, cybersecurity remains a must-own sector for investors. Moreover, this defensive sector is the backbone of the 21st century economy. But let’s take a moment to define cybersecurity.
Cybersecurity refers to tools that protect computers, network servers, data, and mobile phones. It operates much the same way that a bouncer would outside of a bar.
It keeps bad people out and ensures the proper flow of good information.
It protects information stored and processed on the networks and devices I mentioned. And it’s more important than ever. Research group Cybersecurity Ventures says cybercrime could cost the global economy a lot of money.
As much as $10.5 trillion annually by 2025.
I want to break down cybersecurity at greater length today and offer a few great stocks. You can add these to your watchlist or even add them to your portfolio. After all, we want to ensure that you profit from this incredible trend.
Three Types of Cybersecurity
At the very core of cybersecurity, there are three different buckets that we can discuss: cloud security, application security, and network security. Let’s go one by one.
Cloud cybersecurity is booming as a sector right now. It was the primary driver of the 12% increase in cyber-spending in 2021, according to Gartner. (Annual spending on cybersecurity will hit $150.4 billion this year, the consultancy says.)
Cloud storage refers to data servers that are accessed over the internet. It does not require direct storage management by the user. (You don’t need to save documents on a computer.) If you’ve used Google Drive, this is an example of a cloud storage platform. It’s a booming business. Fortress Business Insights says the cloud storage market could grow from $76.43 billion this year to $390.33 billion by 2028.
Cloud computing has a strong reputation for enhanced security. It requires active monitoring by companies like Google and others who protect the systems. And that could deliver lots of revenue and profits to companies focusing on this space.
CrowdStrike Holdings (CRWD) is a company with a “cloud-native endpoint security platform.” Its platform relies on network effects linked to “crowdsourced data.” This improves the platform’s efficiency and allows it to grow smarter and assess real-time threats such as malware.
The stock is currently in the Green Zone on TradeSmith Finance and has uptrend momentum. However, this is a stock that anticipated more volatility, given its VQ score of 50.99%. Still, it could see more stabilization as cloud computing expands into the top category in this sector.
Application security refers to the protection of data that companies store on specific applications. This data is required to run a business. The major issue with these applications is that they’re accessible across many networks. This leaves them prone to cyberattacks. The easiest way to protect application data is by utilizing things like antivirus software or encryptions. Application security also helps protect websites and web applications critical to a company’s operations.
This market is not massive by any means. The application security market was worth around $4 billion last year, according to Mordor Intelligence. If you’re looking for a stock with a specialty in this arena, I have one.
Rapid7 (RPD) operates a product called tCell, which monitors applications in real time. It can assess application risks, provide real-time updates on attacks in progress, and protect applications from existing threats. Its software “crawls” through highly complex applications to understand vulnerabilities. It then provides insight on how to improve security. The stock is currently in the Green Zone and remains locked in uptrend momentum. It, too, has a high VQ score, as many cybersecurity firms do. But investors looking for a long-term opportunity may be content to buy and hold and use trailing stops for protection.
Finally, we have network security. This refers to the protection of a company’s internal network from outside threats. Network security deploys a secure infrastructure that protects against outside access, misuse, spam, phishing scams, or theft.
Palo Alto Networks (PANW) operates some of the most powerful and widely used firewall security platforms. It works with a motto that companies should have “zero trust” in communications that come from outside the company network.
This means that all communications — even an email that is supposedly from your mother — require skepticism. Palo Alto is a major supplier of security to enterprise-level companies. Last year, the company earned $3.4 billion in revenue.
PANW is currently trading in upward momentum and sits in the Green Zone on TradeSmith Finance. It also has less risk than the other companies on our list. Its VQ is just 26.4. This makes it a more compelling stock. But there’s more: The company is also a major holding of hedge fund manager Ray Dalio and has been part of our Best of the Billionaires portfolio since May 14.
Investors looking to play cybersecurity should learn more about the different categories. Remember, cybersecurity is essential at every level of business today. And it will continue to be a profit generator for investors in the years to come.
I’ll be back tomorrow to discuss one of the most under-the-radar trends in America. So be ready to ride a wave of potential in a brand-new sector that could generate $30 billion out of thin air by 2030.