Your Cheatsheet to Cybersecurity Stocks is here!

Introduction

As of September 2021, Cybersecurity stocks have outperformed the broader stock market over the past year, according to Investopedia. 

The cybersecurity market has grown over 11% in 2021 to $73.54 billion, estimates research firm Gartner.

And if you’re someone who has an eye for investing in the stock market, there is no time like now to brush up your research on Cybersecurity stocks. 

Regardless of whether or not you are familiar with Cybersecurity yourself, we’re here with the list of Cybersecurity stocks you need to watch out for to make sure your investments have the highest return! 

The Basics 

Before getting to the list of cybersecurity stocks, let’s quickly go over the definition of cybersecurity and how the stock market works. 

Essentially, Cybersecurity companies provide services to protect electronic information from cybercriminals. These services are used in various industries to protect crucial user data, including but not limited to healthcare, banking, finance, retail, etc. Cybersecurity services are further used by individuals, businesses, and government entities as well. 

And like many other types of businesses, Cybersecurity companies also have stocks. In the US, Cybersecurity stocks are represented by the First Trust NASDAQ Cybersecurity ETF (exchange-traded fund), CIBR.

Over the past year, CIBR has provided a total return of a whopping 49% compared to the benchmark of 35.7% (according to iShares Russell 1000 ETF’s IWB total return). 

Nevertheless, Cybersecurity stocks are the place to invest your money if you are looking for a bang for your buck. 

Top 5 Cybersecurity Stocks 

In October 2021, Microsoft (NASDAQ: MSFT) corporate VP of customer security and trust, Tom Burt, provided an enlightening update. 

According to Burt, Nobelium, the hacker group linked to the massive SolarWinds attack last year targeted global IT supply chains. 

If this turns out to be correct, more global tech firms need more briefing on their cybersecurity infrastructure immediately as well. Therefore Cybersecurity stocks are not only a good investment from their increasing profits but also because the importance of this industry is only going to escalate exponentially very soon.

With that in mind, here are the top 5 to keep an eye out for in the stock market right now:

1. Palantir Technologies Inc. (NYSE: PLTR): Palantir builds enterprise data platforms for use by organizations with complex and sensitive data environments. Its services are used by many industries to build safe vehicles, discover new drugs and combat terrorism.
2. International Business Machines Corporation (NYSE: IBM): International Business Machines (IBM) is a software company that builds a new generation of hybrid Cloud. It allows its customers to access a common platform across all its Cloud, on-premises, and edge environments. The company provides a comprehensive and consistent approach to development, security, and operations across hybrid environments.
3. Twilio Inc. (NYSE: TWLO): Twilio is a Cloud communications platform as a service company with headquarters in California. It offers secure communications for its users, and the primary tenets of its security program include data security, product security, and risk management. Notably, its Twilio Frontline allows its users to connect securely with their customers from anywhere around the globe.
4. Splunk Inc. (NASDAQ: SPLK): Splunk is a California-based software company specializing in big data analytics. On top of that, the company also offers digital security solutions in the form of its Enterprise Security service. In doing so, Splunk provides its clients with developing actionable insights from data while protecting said data. The company accomplishes this by providing real-time intelligence and advanced analytics at scale.
5. CrowdStrike Holdings Inc. (NASDAQ: CRWD):  From its top-of-the-line Cloud workload and endpoint security to its threat intelligence and cyber attack response services, CrowdStrike offers plenty. This Cybersecurity company played a significant role in handling the SolarWinds attack and is one of the most prominent names in the industry. 

Now that we have given you the top 5 cybersecurity companies to look out for, we’ll also give you a list of other cybersecurity companies that may be worth the investment. Depending on the value of the stocks you are looking to invest in and the timeframe you have in mind for the returns, these might be more efficient investments! 

Best Value Cybersecurity Stocks 

These are the cybersecurity stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. That is because profits can be returned to shareholders in dividends forms and buyback (a low P/E ratio shows you’re paying less for each dollar of profit generated).

1. Ribbon Communications Inc.: Ribbon Communications provides network solutions for communications services providers and enterprises. It offers policy and routing servers, media and signaling gateways, cloud, mobility solutions, and more. 
2. CACI International Inc.: CACI International is an information technology products and services company. It provides information assurance and security systems integration, reengineering, electronic commerce, and related services. 
3. Science Applications International Corp.: Science Applications International provides scientific, engineering, and technology applications as well as related consulting services. The company serves the security, environmental, health, and energy markets.

Fastest Growing Cybersecurity Stocks 

The following are the top cybersecurity stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth.

1. Radware Ltd.: Radware is an American-Israeli cybersecurity and application company. It protects data centers, applications, the public cloud, and applications delivery. The company reported net income growth of more than 500% YOY on record revenue for Q2 2021 as it tripled new customer bookings.
2. CrowdStrike Holdings Inc.: CrowdStrike Holdings is a holding company whose subsidiaries offer a cybersecurity platform that provides a range of products and services, including endpoint security, cloud security, managed security services, threat intelligence, identity protection, log management, and more. 
3. Zscaler Inc.: Zscaler is a cloud-based information security company. It provides web and mobile security, threat protection, networking solutions, and cloud application visibility services to customers worldwide. The company reported widening net losses on rising revenue YOY for Q4 FY 2021, which ended July 31, 2021. 

Cybersecurity Stocks with the Most Momentum

These are the cybersecurity stocks that had the highest total return over the last 12 months.

1. Cloudflare Inc.: Cloudflare develops cybersecurity software solutions. It offers a global cloud platform that provides services including load balancing, video streaming, security, domain registration, and more. The company reported widening net losses despite 52.9% YOY revenue growth in Q2 2021. Cloudflare said that a record number of new large customers helped to drive revenue gains.
2. Fortinet Inc.: Fortinet is a cybersecurity company serving enterprises, service providers, and government organizations worldwide. The company provides a broad, integrated suite of security technologies, including intrusion prevention (IPS), firewall, VPN, and antivirus.

Can you invest in NASDAQ from India? 

The answer is both yes, and no. While Indian citizens cannot directly invest in NASDAQ stocks, there are other legal ways to enable them to do so. 

Investing in US stocks by Indian investors is permissible under RBI’s Liberalized Remittance Scheme (LRS) by using purpose code S0001. This same purpose code also allows Indian investors to open a US bank account. 

How to Invest in US stocks from India 

Although many Indian investors tend to invest with Multinational companies (MNCs), this is not recommended due to the higher multiples involved in this process. Essentially, it will be a lot more expensive to trade with an MNC than other options. 

The two recommended routes for Indian investors to trade in US cybersecurity stocks are as follows: 

• Brokerage account: With this option, Indian investors wishing to invest in cybersecurity stocks will have to create a trading account with a US brokerage account. You will need your PAN number, photo of your PAN card, and proof of address. After the account is open, Indian investors can transfer funds into their account to start trading in the US stock market. The RBI’s LRS allows you to invest up to $250,000 per financial year in the US markets from India.
• Mutual funds: Indian investors can also invest in the US-focused mutual funds in India. With this, there is no limit to how many Indian investors can invest in the US stock market. However, the trade-off is that your returns depend on the risk profile of the fund itself. Additionally, the expense ratio (fees charged to manage the fund) for these funds tend to be higher since the fee is for both the general management of the fund plus an additional expense charged by underlying international schemes they invest in.

Finally, it is key to note that any profit that Indian investors make by trading cybersecurity stocks in the US market will be taxed on investment gains as well as dividends. 

Taxes on investment gains: The threshold for long-term capital gain is 24 months, with the rate of 20% with indexation benefit. If you sell a stock in less than 24 months, capital gains are considered short-term and are taxed according to your income tax slab.

Taxes on dividends: Dividends will be taxed in the US at a flat rate of 25%. Fortunately, the US and India have a Double Taxation Avoidance Agreement (DTAA), allowing taxpayers to offset income tax already paid in the US. The 25% tax you already paid in the US is made available as Foreign Tax Credit and used to offset your income tax payable in India.

Conclusion 

You don’t have to be a Cybersecurity expert to make sense of this Cybersecurity stocks cheatsheet we have put together for you. Whether or not you currently own stock in NASDAQ, glancing through this list and a description of each company will give you a fair sense of what to look out for while investing in Cybersecurity stocks. Moreover, you already know the names of the companies you need to look out for. 

If you have wrapped your head around just how necessary the Cybersecurity domain is and want to enter this field more than just as a trader, you might want to consider upskilling with Cybersecurity to understand the intricacies of this field. 

Look no further than Stanford’s Advanced Cybersecurity Program (ACSP) and advance your career today! 

0 Source: GreatLearning Blog