Where some might get mad, I like to get even.
See, when we spoke back on Oct. 19th, I told you how I’ve fallen for my 2109 Acura MDX hybrid, and the broader scope of autonomous driving capabilities.
Thing is, I left out an embarrassing anecdote. As it turns out, what happened to me during the buying process also happens to millions of others. And today, I want to show you a great way to play the best firms that are addressing the issue.
But before I do, let’s got back to what happened at the Acura dealership. See, everything was running smoothly until the finance manager came to tell my wife and me that our credit didn’t go through.
No, we are not deadbeats. We have very high credit scores. We had simply forgotten one small detail. After the infamous 2017 hack at Equifax Inc. (NYSE:EFX) comprised 143 million accounts, including ours, we froze our credit.
This meant that no one, not even us, could take out a loan or credit card in our name. Fortunately, it only took a few minutes for us to login to the credit agency and get the lease financing approved.
But the situation got me thinking a lot about our brute force protection system the other day when reading about the latest big cyber intrusion. This one involved 500 million hotel customers, and once again, included my wife and I.
It seems like consumers like us can’t go very far these days without hearing about some sort of corporate data breach that compromises their private data.
Fortunately, this steady stream of computer hacks and cyber-crimes aren’t only a cause of concern.
They also present the opportunity for savvy investors to choose an investment that will beat the market, again, next year…
How to Profit from the Hacks
Let’s be clear. Shutting down your credit accounts isn’t exactly a move filled with finesse. It doesn’t stop thieves from hacking into your online accounts or prevent a data loss if they hit a third-party account you have online.
But it does prevent them from stealing your identity, and then using that to start new accounts in your name. If they steal your identity, your life will be turned upside down – and will likely cost you thousands in charges you have to dispute.
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My wife and I were discussing this very topic the other day after the latest big hack made the news. See, we’re longtime clients at hotels run by Marriott International Inc. (NYSE:MAR).
The firm’s Starwood properties, where we also stay, started getting hacked back in 2014. The break-in went undetected until last September. No wonder the bad guys comprised 500 million accounts.
Here’s the thing. The rate of cyber intrusions isn’t likely to abate any time soon. So, there are basically two things you can do:
- Protect your online identity the way my family has, or by subscribing to a professional service.
- Profit from this red-hot trend.
A Hackable Market
Consider that MarketsandMarkets says 2018’s cybersecurity value is $137.8 billion. By 2022, that figure will hit $231.9 billion, for a compound annual growth rate of 111%.
Forecasters at Cybersecurity Ventures predict that cyber-crime damages will hit $6 trillion annually by 2021, double the figure from 2016. And over the next five years, cyber spending will total more than $1 trillion.
That’s why I continue to recommend the ETFMG Prime Cyber Security ETF (NYSE:HACK). This exchange-traded fund (ETF) holds some 52 stocks that cover the entire field. Debuting in November 2014, HACK was the first true cybersecurity-focused ETF, and is poised for a strong rebound for 2019.
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The fund also offers us some nice diversification – it’s comprised of companies that provide hardware, software, and consulting services to defend against cybercrime. Some 80% are firms based in the U.S., with the bulk of the rest operating out of Israel, Japan, and the United Kingdom.
Of those, roughly 55% cover systems software and 14% are related to hardware. The rest represent such areas as aerospace and defense, IT services and application software.
One of the things I really like about this investment is that it holds an intriguing mix of small cybersecurity firms balanced with some larger, more stable leaders.
For instance, HACK holds several firms that cater to big corporations and government agencies. We’re talking old guard members like Cisco Systems Inc. (Nasdaq:CSCO) and Symantec Corp. (NASDAQ:SYMC), which rank as the fund’s 1st and 4th largest holdings, respectively.
HACK’s Growth Firms
But HACK also holds some of the industry’s smaller, more aggressive growth firms. These are companies with breakout technology and huge growth prospects.
Take a look:
Mimecast Ltd. (Nasdaq:MIME). Although Mimecast is largely flying under Wall Street’s radar screen, it already boasts some 15,000 global customers. The “mime” in Mimecast actually underscores the company’s main thrust. It stands for “Multi-Purpose Internet Mail Extensions.” The upshot: Mimecast helps protect users against phishing scams and other intrusions made through a company’s email system that resides in the cloud. It also offers real-time scanning of all Web addresses within incoming and archived emails on every click. That screening shields users from both immediate and delayed attacks.
Palo Alto Networks (NYSE:PANW) delivers a broad suite of next-generation firewalls and a range of security features for enterprises that have a need to protect their IT systems and data. The company bills itself as “An enterprise security platform…for all users on any device across any network.” And that is really invaluable in today’s tech landscape, especially at the enterprise level where companies often encourage their employs to use their own mobile devices, a process that cuts overhead but increases cyber risk.
Splunk Inc. (NASDAQ:SPLK) ranks as the fund’s 10th-largest holding and is a great backend play on Big Data. The Silicon Valley firm has developed a unique business around protecting all types of machine data created by websites and corporate networks. Unprotected, that data can reveal secrets about such key operations as user behaviors and security risks. Founded in 2003, the company has grown quickly and now has a $12 billion market cap.
Qualys Inc. (Nasdaq:QLYS) is the fund’s 11th-largest holding and is a great play on cloud computing. The firm’s sensor-centric Cloud Platform provides clients with a continuous, always-on assessment of their global security with 2-second visibility across all their IT assets.
Qualys says it handles more than 1 trillion security actions a year and also maintains 28 billion indexed data points. The system integrates to the major cloud computing providers from Amazon.com Inc.’s (Nasdaq:AMZN) Web Services, Alphabet Inc. (Nasdaq:GOOGL), and Microsoft Corp.’s (Nasdaq:MSFT) Azure.
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As you might imagine, HACK was on a bit of tear that pushed shares sharply higher over the fiscal year that ended in late September. After the market’s recent selloff, it offers us a bargain way to play the rapidly growing field.
Now, there’s also the matter of performing my ETF test – I’ve outlined it in this Nov. 20 post – before proceeding.
Recently trading at just under $37, Hack has roughly $1.2 billion in assets under management. The ETF also has a reasonable expense ratio of 0.64%.
As you can see, what happened to my wife and I in the Acura dealership is increasingly becoming a common occurrence for more and more Americans who are forced to respond to cyber-attacks playing out on a daily basis.
And it’s why I’m expecting HACK, with its great selection of leaders in the space, to show a solid rebound in 2019. I’m projecting gains of 40% over the next three years.
Of course, some of the same technologies involved in detecting cybersecurity threats -artificial intelligence (AI) is one key example – can also be used to make startlingly accurate trade predictions.
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The kind of predictions my colleague, the renowned pattern trader Tom Gentile, has just devised. This system was developed by rocket scientists with a proprietary sequence-matching protocol that can spot hidden trading patterns that are invisible to the traders on Wall Street, and everyone else who doesn’t possess it.
But if you follow along with Tom, all you have to do is click a few buttons on your computer or phone and watch the daily trade opportunities roll in.
You can peruse Tom’s underground command center, and learn more about his AI-enabled system, by clicking here.
See you back here soon.