Our theme of Cyber Security Stocks has declined by about -6% year-to-date, significantly underperforming the S&P 500 which has gained about 11% over the same period. However, the sector is likely to come back into focus for a couple of reasons. Firstly, there was a major cyber attack on the computer systems of the Colonial Pipeline forcing a shutdown of a pipeline that controls roughly half the gasoline, jet fuel, and diesel flowing along the U.S. East Coast. This marks the second major attack on core U.S. infrastructure in six months, coming on the heels of the Solar Winds hack which was reported last December. Secondly, last week, President Joe Biden signed an executive order aimed at bolstering the federal government’s cybersecurity defenses, with a host of plans to implement stronger cybersecurity standards. The recent events are likely to cause companies and the U.S. government re-assess threats and potentially increase cybersecurity-related budgets. This should bode well for companies that provide software, hardware, and services that help protect computer systems and networks.
Within our theme, Fortinet, a company that provides cybersecurity-related hardware and software, has been the strongest performer, rising by about 37% year-to-date driven by stronger than expected earnings in recent quarters. On the other side, the stock price for Qualys a company that provides cloud security, compliance, and related services, remains down by about 18% this year, as its outlook for this fiscal year was lighter than analysts expected.
[4/14/2021] How’s Our Cybersecurity Theme Faring?
Our indicative portfolio of Cyber Security Stocks has declined by about -1% year-to-date, underperforming the S&P 500 which has gained about 10% over the same period. However, the theme remains up by over 130% since the end of 2019, significantly outperforming the broader markets. The recent sell-off comes as investors book profits on remote working and SaaS…