Cyber Security: The New Investing Frontier
The internet has been one of the greatest creations of modern man. It has revolutionized nearly every aspect of our lives. The ease of communication combined with the ease of storing and sharing information has ushered in a new era for humanity. Conducting financial transactions has never been easier or faster. We are seeing the democratization of education through online education. Mobile devices and social networks keep people more connected and accessible than ever before. Digital media has completely disrupted media distribution and interaction. The cloud has radically improved our ability to access and store our own information, from any device, anywhere in the world. Amazingly, we are only at the beginning. This profound era of communication and connectivity has bought along with it a profound era of cyber crime.
Cyber security is one of the top challenges we are facing today as a society. Gone are the days when you all you needed were a firewall and a virus scanner to keep your computer and information safe. The digital and information age has been a huge advancement for society, but cyber security and cyber attacks are increasing at an alarming rate. Cyber crime is proving to be a systemic risk to governments, businesses, and institutions around the globe. With the huge amount of data floating around and the way we have become so dependent on computers and the internet, a cyber attack can cripple a nation, destroy a business, and bring the masses to financial ruin.
Cyber criminals are seeking out all types of information. Some are going after the personal and financial information of individuals. Others are seeking to steal intellectual property and trade secrets. Politics is the motivation for some. There are even scenarios where a nuclear power plant or an electrical grid could be hacked, which would be devastating for an entire region or nation. Some of the more notable attacks recently are
The global cost of cyber crime is approximately $445 billion annually. Millions of people have their personal information compromised every day. Thousands of businesses and institutions are breached every day.
The growing issue of cyber security has created an interesting opportunity for investors. Every day is war between hackers and our computers. To stay protected from these attacks, all institutions, businesses and governments must spend, and continually spend on cyber security. If they do not protect themselves, history has shown us an attack could be cataclysmic. Secondly, if your users or customers do not feel secure they will not use your product or service. Very rarely do we have a situation where everyone must spend on a product or service regardless of the economic or political landscape. That means long-term growth for the cyber security industry.
We are seeing the US government ramp up cyber security efforts. The government has set out new initiatives to increase cyber security investment and innovation. Cyber security is also one of the few areas that is seeing an increase in spending, while most aspects of our defense budget is seeing cuts. The US is expected to spend $13 billion on cyber security this year. Overall the cyber security industry receives $80 billion from government spending. The private sector is also spending heavily on cyber security. The private sector spends roughly $300 billion on cyber security annually and we should expect that number to increase. Venture capitalists are nearly doubling their investment into cyber security startups to $800 million this year. We are seeing businesses and governments taking the cyber security issue more seriously. Cyber security for institutions is like food and water for the human body. You need it to survive, and if you do not, you will become a victim.
I believe cyber security should be an area for investors to focus on in the coming years. There are many players in the space, some large and some small, but I expect there to be great growth opportunities within the industry. I do not see any clear-cut leaders or innovators but there are some good companies out there currently. Companies like Checkpoint Software Technologies, Cisco, Symantec, and Fortinet to name a few. All four of these companies are innovating at a very rapid pace in the cyber security space. However, as new companies come to market and the industry matures, we will see some clear-cut leaders and innovators in the space that will outperform the competition. All four companies are also showing promise from a technical standpoint.
As stated before, it is very rare that you have a situation where businesses, governments, institutions and individuals must all spend on a product or service regardless of the economic and political landscape. There is a cyber war going on, and everyone must spend on cyber security, those who do not will fall victim. It is also rare that your investment dollars will not only line your pockets with profits, but also help create a safer more secure society. We are only at the beginning of this battle. With the globe becoming more connected and the advent of smart homes, smart appliances, wearable technologies, etc there will be new opportunities for cyber criminals to grow their organizations and unleash attacks that can adversely affect us all. Thus creating more demand for cyber security products. I really believe this will be a rapidly growing industry, and is an industry all investors should be paying attention too.
Below you will find technical analysis on CSCO, SYMC, FTNT, and CHKP. My investment thesis for cyber security is for the long-term. I feel my focus on the weekly and monthly timeframes was most appropriate. I am very optimistic about the growth opportunity with in the cyber security industry, but I am also wary of an overall market correction.
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