Our theme of Cyber Safety Shares stays down by about 1% year-to-date, considerably underperforming the S&P 500 which has gained about 13% over the identical interval. Nonetheless, the theme has picked up a bit since our final replace in mid-Might, when it was down by 6%. The underperformance versus the broader indices is probably going attributable to the truth that a lot of the shares within the theme are high-growth, high-multiple names which were out of favor within the present market, as buyers rotate into worth and cyclical shares to play the post-Covid increase within the U.S. financial system. Nonetheless, there’s good purpose for buyers with a long-term view to extend their publicity to cybersecurity shares. Firms and governments are getting extra severe about defending their networks and infrastructure, following a number of high-profile cybersecurity incidents in current months, together with the ransomware assault on the Colonial Pipeline, the SolarWinds hack, and the current cyber assault on JBS – the world’s largest meat provider. The growing shift from on-premise to cloud-based info techniques must also make corporations prioritize safety. Furthermore, IT spending by corporates, usually, is more likely to decide up from this yr, after they scaled again on spending in 2020 attributable to Covid-19. This could bode nicely for corporations that present software program, {hardware}, and companies that assist defend laptop techniques and networks.
Inside our theme, Fortinet (FTNT) an organization that gives cybersecurity-related {hardware} and software program, has been the strongest performer, rising by about 49% year-to-date on account of stronger than anticipated quarterly outcomes and its pivot to the cloud. On the opposite aspect, the inventory value for Qualys (QLYS) an organization that gives cloud safety, compliance, and associated companies, stays down by about 18% this yr, as its steering for this fiscal yr was weaker than anticipated.
[5/17/2021]
Our theme of Cyber Safety Shares has declined by about -6% year-to-date, considerably underperforming the S&P 500 which has gained about 11% over the identical interval. Nonetheless, the sector is more likely to come again into focus for a few causes. Firstly, there was a serious cyber assault on the pc techniques of the Colonial Pipeline forcing a shutdown of a pipeline that controls roughly half the gasoline, jet gasoline, and diesel flowing alongside the U.S. East Coast. This marks the second main assault on core U.S. infrastructure in six months, approaching the heels of the Photo voltaic Winds hack which was reported final December. Secondly, final week, President Joe Biden signed an govt order aimed toward bolstering the federal authorities’s cybersecurity defenses, with a bunch of plans to implement stronger cybersecurity requirements. The current occasions are more likely to trigger corporations and the U.S. authorities re-assess threats and probably improve cybersecurity-related budgets. This could bode nicely for corporations that present software program, {hardware}, and companies that assist defend laptop techniques and networks.
Inside our theme, Fortinet (FTNT), an organization that gives cybersecurity-related {hardware} and software program, has been the strongest performer, rising by about 37% year-to-date pushed by stronger than anticipated earnings in current quarters. On the opposite aspect, the inventory value for Qualys (QLYS) an organization that gives cloud safety, compliance, and associated companies, stays down by about 18% this yr, as its outlook for this fiscal yr was lighter than analysts anticipated.
[4/14/2021] How’s Our Cybersecurity Theme Faring?
Our indicative portfolio of Cyber Safety Shares has declined by about -1% year-to-date, underperforming the S&P 500 which has gained about 10% over the identical interval. Nonetheless, the theme stays up by over 130% for the reason that finish of 2019, considerably outperforming the broader markets. The current sell-off comes as buyers ebook earnings on distant working and SaaS shares that rallied massive by means of the pandemic. Nonetheless, this might current an excellent alternative for buyers to enter the cybersecurity house. World IT spending is predicted to select up this yr after a muted 2020, rising by about 8.4% to $4.1 trillion per Gartner. Cybersecurity is more likely to be a serious focus space for many corporations given the growing shift to distributed workplaces and cloud-based functions and a few high-profile safety breaches in current months. Inside our theme, Fortinet (FTNT), an organization that gives cybersecurity-related {hardware} and software program, has been the strongest performer, rising by about 34% year-to-date pushed by stronger than anticipated earnings. On the opposite aspect, Mimecast Restricted (MIME), an organization that develops cloud safety and danger administration companies for electronic mail and company information, was the weakest performer declining -28% thus far this yr, as a few of its merchandise had been impacted by a safety breach in January.
[3/11/2021] Time To Purchase Cybersecurity Shares?
Our indicative portfolio of Cyber Safety Shares has declined by about 8% year-to-date, pushed by the broader sell-off in know-how and excessive progress shares. The theme has additionally underperformed the Nasdaq-100, which is down by about 4% over the identical interval. Nonetheless, we predict this may very well be an excellent time to enter these shares. Governments and companies are more likely to prioritize digital safety spending following some current high-profile cyber assaults. In December, there was a large information breach on U.S. Federal authorities laptop techniques, tied to community administration software program vendor SolarWinds. Extra lately, Verkada, an organization that gives cloud-based safety digital camera companies to a bunch of establishments and corporations together with Tesla, was hacked. Inside our theme, Fortinet (FTNT), an organization that gives cybersecurity-related {hardware} and software program, has been the strongest performer, rising by about 21% year-to-date. On the opposite aspect, Mimecast Restricted (MIME), an organization that develops cloud safety and danger administration companies for electronic mail and company information, was the weakest performer declining 25% thus far this yr.
[2/22/2021] Cybersecurity Shares To Watch After SolarWinds Assault
Our indicative theme of Cybersecurity Shares has returned over 150% for the reason that finish of 2019, in comparison with positive aspects of about 21% on the S&P 500 over the identical interval. The theme is up by about 5% year-to-date. Cybersecurity corporations usually present software program, {hardware}, and companies that assist defend laptop techniques and networks from information theft and potential disruption of companies. The sector noticed renewed curiosity late final yr, following information of a giant cyber-attack on IT infrastructure and community administration software program vendor SolarWinds, inflicting growing issues that software program instruments used day by day by organizations and governments may very well be susceptible. Extra broadly, following Covid-19, financial exercise is more and more transferring on-line with companies additionally turning into extra distributed on account of the earn a living from home development. This could trigger corporations to prioritize their cybersecurity spending. Inside our theme, Zscaler (NASDAQ:ZS) and CrowdStrike (NASDAQ:CRWD) have been the strongest performers, with their inventory costs rising by nearly 5x every for the reason that finish of 2019. However, Qualys (NASDAQ:QLYS) has underperformed, declining by about 16% over the identical interval.
See our Cybersecurity Shares theme for a whole listing of the businesses in our theme and a take a look at their current efficiency.
[5/22/2020] Cybersecurity Shares
Cybersecurity shares have rallied sharply this yr, with our indicative theme of six cybersecurity shares that embody Palo Alto Networks (NYSE: PANW), Zscaler (NASDAQ: ZS), and others up by about 28% year-to-date, on an equally weighted foundation. Whereas cybersecurity is a comparatively various and complicated sector, we consider there may very well be two broad developments driving the surge. Firstly, with the unfold of the Coronavirus pandemic, extra individuals have been working from house, and this has required corporations to raised safe company IT infrastructure, driving up demand for cybersecurity instruments. Secondly, most of those corporations supply their companies on a subscription foundation, with recurring income streams that might make them a secure wager throughout occasions of uncertainty. It’s additionally very probably that the disaster will trigger a structural shift in the way in which companies function, benefiting these shares nicely previous the pandemic. Our theme of Cyber Safety Shares outlines a number of the key names within the cybersecurity house and the way they’ve carried out lately. Part of the evaluation is summarized beneath.
Zscaler ($10 billion market cap, $303 million FY’19 income), affords two instruments, particularly Zscaler Personal Entry (ZPA) which gives safe entry to internally managed functions, which are hosted internally in information facilities or in non-public or public clouds, and Zscaler Web Entry (ZIA), which allows customers to hook up with externally managed functions akin to Microsoft’s Workplace 365 and Salesforce. The inventory has surged by 60% this yr, as an more and more distributed workforce drives demand for the corporate’s safe entry options.
Palo Alto Networks ($23 billion market cap, $2.9 billion income) is a cybersecurity firm finest identified for its firewalls, that are community safety gadgets that scan for malicious visitors. The corporate has been more and more specializing in cloud-based software-as-a-service (SaaS) safety instruments. Whereas the inventory is down barely year-to-date, partly attributable to slowing income progress, the corporate may very well be an excellent long-term wager as companies more and more transfer on-line.
CrowdStrike ($17 billion, $481 million income) affords a cloud-delivered endpoint safety platform, which depends on light-weight software program working on the client’s servers or laptops. These functions, in flip, ship information to a cloud-based safety system that analyses threats. The inventory is up by over 60% year-to-date, because the coronavirus pandemic has expanded the corporate’s addressable market meaningfully.
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