5 Stocks To Watch As The Cyber War Heats Up

November 07, 2017 - Safehaven


Cyber security is a megatrend that’s got horns just as big as the crypto currency bull. They’re both revolutionary elements of the digital era, and they both play a role in what is no less than World War III, unfolding in our cyber space.

Nothing can hold tech back right now, and precisely because of that, cyber security is becoming an even bigger bull. That’s because business is under assault across every industry, everywhere in the world.

What we’re seeing right now is a redistribution of wealth—and one of the biggest the world has ever seen. Why? Because the rise of advanced digital-era technology has led to the rise of an extremely sophisticated form of organized crime that moves off the streets and into the cyber space.

It’s going to cost us $6 trillion every year by 2021. In other words, it’s bigger than the worldwide trade in major illegal drugs.

This is the next world war, and industries are spending big to fight it because each single cyber breach costs around $4 million on average, and if you look just at the U.S. the cost per breach is upwards of $7 million.

This year has seen major activity on the cyber battlefield, and the last two months alone have seen attacks on Equifax, Deloitte and even the Securities and Exchange Commission (SEC).

Even so, these could have been just the test battles. The real war is yet to come, and cyber security companies are on the front line of the profit-making war machine.

Here are 5 stocks suiting up for battle:

#1 INTEL Corporation (NASDAQ:INTC)

This stellar chipmaker has had yet another good quarter, and they’ve also raised guidance for the full year. It’s facing stiff competition from Advanced Micro Devices (AMD), which just released two new chips, but the INTEL numbers don’t show this has had much negative impact. It has had a positive one, though, with INTEL rising to the occasion and keeping pace with the competitive drive. Next quarter’s outlook shows a sequential increase in operating income and earnings per share.

And guidance for the full year gets a boost …

The company is also doing some cost-cutting and adopting a more reserved acquisition strategy.

All of this has combined to prompt analysts to raise their price targets on Intel shares. BMO Capital Markets has raised its rating for Intel to outperform. They see higher profitability next year and are raising the price target from $37 to $58. As of pre-market on Tuesday, 31 October, Intel was trading at $45.33. We like the fact that shares are trading at a 7% discount to Intel’s industry peers (on a free cash flow multiple basis, according to BMO).

#2 Hill Top Security Inc./Big Wind Capital (CSE: BWC; OTC:BGGWF).

With an estimated 4,000 cyber-attacks a day—and counting—the only serious solution to cyberwarfare is military-grade. And Hill Top is emerging as the first military-grade cyber defense solution that even small- and medium-sized business can afford.

This company—run by some of the best cyber minds in the U.S. defense industry, and all hailing from the military establishment—is offering three unique services that should strike major confidence in investors because there are some major gaps in cyber security that we haven’t been able to close.


The same people behind this company were hired by the intelligence community to build the auditing platform to track hundreds of millions in ‘black money’ that went missing from the U.S. government because it wasn’t directly allocated by Congress. They’ve successfully completed government contracts which center on fraud and abuse and detection of financial anomylies.

Hill Top Security (Is currently merging with Big Wind Capital) offers a unique, proven platform—and the first in the world—that gives small and medium businesses the ability to protect themselves and their clients in the cyber space. Now it’s targeting SMBs, which number over 27 million, revenue from the first public sector clients is coming online and is expected to eclipse government revenues at a fast pace.

They one-up the competition in this space not only by opening things up to SMBs, which a single breach could close down, but also by not just reacting to cyber-attacks but by preventing them as well. Hill Top’s artificial intelligence (AI) predicts threats for you, and alerts you to any suspicious activity. And their platform is secure enough to have gained the trust of the U.S. Defense Department.

Hill Top’s Vauban DNA system was originally developed as a global logistics solution for massive parallel events (think UPS). But then it added an intelligence-gathering element with military-grade security for the U.S. government. Now it’s also the new breed of financial security, with cryptocurrency tech incorporated to support market trading and transactions.

It’s also made Hill Top a takeover target, catching the eye of Big Wind Capital Inc. (CSE: BWC; OTC:BGGWF).In July, Big Wind announced it would acquire Hill Top, and just last week this deal was concluded for this premier military-grade cyber security company.

This is where something that’s been confined to elite cyberdefense circles starts pinging the mainstream investor radar. We think that this company could take real cyber security mainstream, and we expect the news flow to be fast-paced.

#3 Palo Alto Networks Inc. (NYSE:PANW)

While newer on the cyber security scene, Palo Alto has been rather disruptive, introducing a firewall that controls how data flows through a company’s corporate infrastructure. It’s about network security, and so far the market is pretty happy with its performance. Between 2013 and 2016, PANW revenues jumped 248%, hitting $1.4 billion. It’s been a bit of a volatile ride, though.

We like the fact that the company is now transitioning to a subscription sale model for its products, and away from one-time sales. But this transition is never easy and share prices reflect the hiccup in near-term revenue-growth expectations. That said, this subscription model could make its future profits a lot more consistent. It also means it might be a good time to get in on Palo Alto.

Trading with a market cap of $13.5 billion, Palo Alto is projecting the data infrastructure of an estimated 85 Fortune 100 companies, just for starters. It’s also captured the next-gen firewall solutions for more than half of the Global 2000. It’s Q3 earnings were impressive, hitting $431.8 million, and expansion seems a sure thing. It beat analyst estimates by 13 cents in Q3, and a significant number of analysts see earnings boosts for 2018.

#4 FireEye Inc. (NASDAQ:FEYE)

This is one of the most impressive cyber-security barn-stormers out there. It only went public in September 2013, and already by December that same year it was spending $1 billion on a major acquisition, Mandiant, which was one of the top data breach and response companies in the space.

This is now a massive and fast-growing company of highly sought-after cyber experts and products, all rolled into a cloud-based platform that is a favorite among key Fortune 500 companies, not to mention Global 2000 companies.

There was a very aggressive acquisition spree here, that has slowed down—and since last year, the company moved into the black. FireEye peaked in mid-2015 at $55 a share, and then slid to under $11 in mid-March this year. But since then, it’s pushed back up to $17 (as of pre-market trading on Tuesday, 31 October). Overall, it’s trajectory looks solid, especially in the current cyber warfare climate.


 

FEYE has delivered positive earnings for 13 straight quarters, not counting Q3 2017 for which results were scheduled for 1 November, right after the time of writing.

#5 Cisco Systems Inc. (NYSE:CSCO)

This giant, $170-billion market cap company is looking for a turnaround, and it might get it. This is a networking products giant, and cybersecurity hasn’t been its bread and butter, accounting for only $500 million of its total revenues. But this is where things start to change. Cisco’s newest security software is said to be more predictive in preventing threats and recognizing traffic patterns that could indicate a breach attempt. It’s quite possible that this is Cisco’s resurgence into cyber security.

It’s definitely been busy reorganizing. It’s laid off 6,600 people over the past year and it was all about rethinking focus and moving onto the cybersecurity battle field. It’s also partnering with Apple to develop a tool for controlling iOS devices for enterprise cybersecurity teams.

It’s been a rough road, but transitions always are. It’s seen seven consecutive drops in quarterly revenue, and cybersecurity remains only a drop in its revenue bucket. But it’s a cheap stock (one of the cheapest in the industry) and if it’s making a bold re-entry into one of the hottest sub-sectors right now, this might be a good time to get in.

Honorable Mentions in the cyber security space:

Computer Modelling Group (TSX:CMG) is a software technology company producing reservoir simulation software for oil and gas companies. Computer Modeling Group LTD. Is a tempting trade for investors as it brings together two essential industries - tech and resources- which are going anywhere any time soon. Especially as the need for security grows, a tech company involved in the oil and gas industry has an incredible opportunity to offer other services.

While Computer Modelling Group focuses on the resource industry, its technology is definitely breaking ground. Founded nearly 40 years ago by Khalid Aziz, a renowned simulation developer, the company has proven that it has staying power. As the resource industry meets technology, this will be a stock to pay attention to.

Blackberry Ltd (TSX:BB) This well-known cell-phone pioneer is engaged in the sale of smartphones and enterprise software and services. The Company's products and services include Enterprise Solutions and Services, Devices, BlackBerry Technology Solutions and Messaging.

Blackberry used to be a worldwide leader in phones, but Apple, Google and other Android manufacturers have rapidly acquired market share. Blackberry has since focused on software and is now developing systems for autonomous vehicles. Tech giants such as Apple and Google won’t be able to repeat Blackbery’s success in this sector that easily.

Kinaxis Inc (TSX:KXS) is a provider of cloud-based subscription software for supply chain operations. The Company offers RapidResponse as a collection of cloud-based configurable applications. The Company's RapidResponse product provides supply chain planning and analytics capabilities that create the foundation for managing multiple, interconnected supply chain management processes, including demand planning, supply planning, inventory management, order fulfillment and capacity planning.

Kinaxis is a growing company, but the company has already carved out a significant piece of the pie. As a leader in its field, Kinaxis is a force which investors are keeping an eye on.

Kuuhubb Inc. (TSXV: KUU) is a company active in the development and acquisition of lifestyle and mobile video game applications. Its strategy is to create sustainable shareholder value through undervalued, but proven applications with robust long-term growth potential.

Thought it’s focus is on mobile video games, Kuuhubb’s tech makes it a likely target of acquisition and could be a key player in the mobile industry.

The company is headquartered in Helsinki, Finland and operates in both U.S. and Asian markets.
Kuuhubb Inc has seen its stock increase after a few recent acquisitions and currently trades at $1.60.

3D Signatures Inc (CVE:DXD) is a high-tech personalized company with an innovative new software platform which uses 3D analysis to target various diseases and help clinicians identify a diagnosis and optimize treatment plans. 3D Signatures’ software is saving doctors time which will make a huge difference in the treatment of patients.

As one of the only honorable mentions not directly tied to the cybersecurity industry, it is worth noting that 3D Signatures uses advanced tech with its platform, and as the medical field becomes more digitalized, 3D Signatures is sure to leave its mark.

The company’s broad scope and futuristic technology brings a promising opportunity to potential investors. 3D Signatures is at the forefront of a new revolution in medicine, and investors are sure to take notice.

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Forward-Looking Statements

This news release contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include: that cybersecurity and information security industries will continue to grow as expected; that Hill Top Security Inc. ( “Hill Top”) will be acquired by Big Wind Capital Inc.; and that Hill Top could take real cyber security mainstream. Risks that could change or prevent these statements from coming to fruition include: that cybersecurity and information security industries will not grow as quickly as expected or that such industries will decline in size; that Hill Top will not be acquired by Big Wind Capital Inc.; and that Hill Top will not take real cyber security mainstream. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The forward-looking statements contained in this news release reflect the current expectations, assumptions and/or beliefs of the writer based on information currently available to the writer. In connection with the forward-looking statements contained in this news release, the writer has made assumptions about: expected growth in the cybersecurity and information security industries; that Hill Top will be acquired by Big Wind Capital Inc.; and that Hill Top will take cyber security mainstream. The writer has also assumed that no significant events will occur outside of Hill Top’s normal course of business. Although the writer believes that the assumptions inherent in the forward-looking statements are reasonable, the forward-looking statements are not a guarantee of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein. The forward-looking information contained herein is given as of the date hereof and the writer assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.

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