Hacking into personal information, intellectual property and government data has reached epidemic proportions. The Equifax data breach last month compromised around 145 million people’s personal credit information. HBO is struggling to protect its flagship programming from being viewed before it releases it. Government and military intelligence is stolen almost daily, and the results of several elections around the world may have been affected by hackers, too. The war of hacking is in full bloom, and it seems as if there is little we can do to avoid it.
You have probably seen several articles on what you can do to add protection to your own data. For my personal protection I use a password-protection site called LastPass that has been helpful. It’s now been over a year since my personal debit card has been hacked, after several previous incidents.
I could spend today discussing the various tactics of protecting your personal data, however, my focus will be on what the implications of data breaches are from an investment standpoint. Until recently, it appeared that Fortune 500 CEOs did not see cyberhacks as a big enough worry to warrant much budget. I believe, in the wake of certain CEO terminations due to cyber hacks, that these budgets will see a large piece of the budget pie in their next fiscal year.
The two biggest issues in fighting cybersecurity attacks are the lack of a “holy grail” to stop it and that the problem constantly evolves. You can win a battle, but you will never win the war. This is why I don’t suggest investing too much in any one company, but rather look at a diverse holding of cybersecurity companies. A couple of exchange-traded funds concentrate their investments in a few dozen different cybersecurity related companies.
There is a saying in my industry that goes like this: “The trend is your friend.” A big thing most investment managers look for is huge and sustainable trends to participate in. I feel it is safe to say cybersecurity has nowhere to go but up for many decades. While some of the companies will certainly fail, and others may have rich valuations, the overall trend in this sector should have a very large and sustained rise. That’s the kind of investment piece I want in my long-term portfolio.
Aaron Pickert, CRPC, is associate adviser at Stewardship Capital in Independence. Past performance is no guarantee of future results. Advice is intended to be general in nature.