Yahoo (NASDAQ: YHOO) has had the mother of all security breaches, but it’s a years-old event just now coming to light. In fact, Yahoo may have known about the security breach when it happened in 2014.
As Sen. Al Franken said in a letter to Yahoo, “We are even more disturbed that user information was first compromised in 2014, yet the company only announced the breach last week. That means millions of Americans’ data may have been compromised for two years. This is unacceptable.”
In fact, Yahoo’s is the biggest cybersecurity breach in history, and something that no one is talking enough about. Some 500 million Yahoo accounts were compromised. The next closest in size was the 2013 hack that affected 360 million MySpace users.
The rise of attacks, targeting not just social media accounts but banking and credit card data – as was the case with Target (NYSE: TGT) and JPMorgan Chase (NYSE: JPM) – should alarm companies and individuals alike. However, consumers and investors have ways they can protect themselves.
I wrote about cybersecurity stocks earlier this year. At the time, I discussed one of the more diversified ways to play the cybersecurity, which was the PureFunds ISE Cyber Security ETF (NYSE: HACK). The HACK ETF is up nearly 20% since then, while the S&P 500 is up just 6%.
The enormous Yahoo breach means it is time for another look at cybersecurity stocks.
Internet security is as important as ever; we’ve done the hard work to find the top three cybersecurity stocks to own:
Top Cybersecurity Stocks: FireEye (NASDAQ: FEYE)
FireEye might be the best buying opportunity in the cybersecurity business. Shares have fallen over 55% in the last year and now trading at just 3.5 times sales. FireEye may now “still” be a buyout target.
FireEye has already rebuffed a takeover during the summer, with multiple parties interested. It hired Morgan Stanley (NYSE: MS) to find buyers, but FireEye was looking for at least $30 a share. FireEye’s mixed financial results and inability to sell itself wreaked havoc on the company’s stock.
But it’s in a unique position to capitalize on cybersecurity concerns. The company’s methods include detecting cyber attacks before they happen and quickly responding to attacks. Its clients include companies like Sony (NYSE: SNE) and JPMorgan.
Top Cybersecurity Stocks: Palo Alto Networks (NYSE: PANW)
Palo Alto Networks is one of the top cybersecurity stocks in the business. But Palo Alto shares have fallen close to 10% in 2016. The worry is that growth is slowing. However, since its 2012 IPO, Palo Alto has grown its sales nicely, with top line growth of over 40% year-over-year during the latest quarter.
Palo Alto is also becoming even more shareholder-friendly. The company has announced a $500 million share buyback, a big step toward a positive change in capital allocation. The company is also undergoing a material shift toward subscription revenues.
Top Cybersecurity Stocks: Cyberark (NASDAQ: CYBR)
Cyberark is a maker of cybersecurity software, focusing on the health-care and retail industries. It has seen its stock fall 6% in the last year, but it’s one of the few cybersecurity stocks that actually makes money. Cyberark has a solid 11% return on invested capital, and generates over $40 million a year in earnings. What’s more, Cyberark is expected to grow earnings by 20% in 2017.
And of course, as a $1.7 billion market-cap company, Cyberark could easily be bought by a larger company looking to gain a leg up in the cybersecurity market. The players likely to be interested in Cyberark are Cisco (NASDAQ: CSCO) and Checkpoint (NASDAQ: CHKP).
In the end, cybersecurity will continue to be an important issue for companies, consumers and investors. There are a few unique ways to play this, and the three stocks above are great places to start.