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The best cyber security pure-plays

Former City analyst Robin Hardy examines some of the companies investors should consider for exposure to the wave of investment in cyber security
The best cyber security pure-plays

Cyber security is a high-growth business thanks to the volume and complexity of threats growing week-by-week. Along with the rest of the technology sector, shares in this space have taken a beating since the rotation away from growth stocks in November: the tech-oriented Nasdaq index fell by 30 per cent to its recent low and, as Figure 2 shows, may have now undershot its longer trend.  But, as has long been the case with this sector, growth remains strong and, unlike value stocks, that growth does not deplete or become exhausted.

Growth in tools to counter cyber attacks arguably have amongst the best prospects in the technology sector and, unlike other sub-sectors where a specific technology might or might not play out, businesses require many different cyber security solutions from an array of different and specialist providers of what is not largely well-proven technology. So, this is an environment in which most providers should do well. 

Technology stocks have started to rally partly because value has crept in (many stocks have halved), partly because benchmark interest rates driving discounted cash flow valuations have stopped rising and, as our sister publication the Financial Times recently reported, some executives have started aggressively buying the dip. We could well be at an attractive entry point.

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