In this article, we will discuss the 12 best cybersecurity stocks to buy now. If you want to explore similar stocks, you can also take a look at 5 Best Cybersecurity Stocks to Buy Now.
The importance of cybersecurity in today’s digital age cannot be overstated. As pointed out in one of our articles, cyberattacks are increasing across the globe. A report by Nasdaq shows that cyberattacks rose globally throughout 2020, relative to the levels seen in 2019 and 2018. As businesses go digital, their vulnerability to cyberattacks is increasing, and cybersecurity spend is going up.
On February 27, Tenable (NASDAQ:TENB) CEO Amit Yoran appeared in an interview on CNBC to discuss his outlook for the cybersecurity space. Yoran noted that the environment for cybersecurity is “incredibly healthy” as an increased number of cyberattacks is driving cybersecurity spend and thus propelling the sector’s outperformance. At the end of Q4 2022, Tenable (NASDAQ:TENB) was held by 30 hedge funds. As of March 22, Tenable (NASDAQ:TENB) has returned 15.91% to investors on year-to-date basis.
On March 17, Cloudflare (NYSE:NET) CEO Mathew Prince weighed in on the risks of increased cyberattacks amid the recent banking failures. Prince noted that he is seeing a rise in cyberattacks on companies that are clients of the banks that have failed, as hackers are impersonating the banks and exploiting the customers. As of March 22, Cloudflare (NYSE:NET) has gained 28.87% year to date.
The cybersecurity industry has experienced rapid growth in recent years as cyber threats have become more frequent and sophisticated. With the increasing reliance on technology, cybersecurity has become a critical issue for both national and organizational security. This trend has led to a significant increase in investments in the cybersecurity sector, as governments, corporations, and individuals seek to protect themselves from potential cyber attacks.
Portfolio Manager: “Still Playing Pretty Defensive”
On March 21 Independent Solutions Wealth Management’s portfolio manager, Paul Meeks, appeared in an interview on CNBC to discuss his outlook for tech and where he is looking to invest. Paul Meeks anticipates a recession and thinks that right now the best way to go about investing in tech stocks is to remain on the defensive side. Paul Meeks is bullish on small-cap and mid-cap names in tech that are in relatively recession-resistant sectors. Paul Meek said:
“I try to target what I think are the best, most resilient, industries. Right now I got the China reopening trade, I have data networking, semiconductors but all about automobile and industrial applications, (and) cybersecurity.”
While Paul Meeks thinks that these sectors are not completely immune to a recession, he thinks that they are not going to suffer as much as other areas within tech.
In a high interest rate environment, growth investors are repositioning and investing in areas that are not as vulnerable to an economic slowdown. The cybersecurity space can be thought of as a relatively defensive sector within tech due to its importance to corporate and national security. Some of the best cybersecurity stocks to buy now according to analysts and hedge funds include Datadog, Inc. (NASDAQ:DDOG), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and Palo Alto Networks, Inc. (NYSE:PANW). Let’s discuss these, among others, in detail below.
Our Methodology
We sifted through cybersecurity ETFs and found 30 cybersecurity stocks. We then sourced the hedge fund sentiment for each stock using Insider Monkey’s database of over 900 elite hedge funds. We narrowed down our selection to stocks that were the most popular among hedge funds and ranked them in ascending order of the number of hedge funds that have positions in them. Along with each stock, we have included the hedge fund sentiment, analyst ratings, and top shareholders.
12 Best Cybersecurity Stocks to Buy Now
12. Check Point Software Technologies Ltd. (NASDAQ:CHKP)
Number of Hedge Fund Holders: 33
On February 14, Truist analyst Joel Fishbein raised his price target on Check Point Software Technologies Ltd. (NASDAQ:CHKP) to $140 from $130 and maintained a Buy rating on the shares. As of March 22, the stock has returned 13.31% to investors over the past 6 months and is trading at a PE multiple of 19.94. The stock is one of the best cybersecurity stocks to buy now according to analysts and hedge funds.
At the end of the fourth quarter of 2022, 33 hedge funds were bullish on Check Point Software Technologies Ltd. (NASDAQ:CHKP) and disclosed positions worth $754.8 million in the company. This is compared to 32 positions in the preceding quarter with stakes worth $680.4 million. The hedge fund sentiment for the stock is positive.
As of December 31, D E Shaw is the leading shareholder in Check Point Software Technologies Ltd. (NASDAQ:CHKP) and has a stake worth $166.8 million.
11. Gen Digital Inc. (NASDAQ:GEN)
Number of Hedge Fund Holders: 34
Gen Digital Inc. (NASDAQ:GEN) is a leading American cybersecurity company best known for Norton. The stock is placed eleventh among the best cybersecurity stocks to buy now and is trading at a PE multiple of 17x, as of March 22, and is offering a forward dividend yield of 3%.
On February 2, Gen Digital Inc. (NASDAQ:GEN) posted strong earnings for the fiscal third quarter of 2023. The company reported an EPS of $0.45 and outperformed EPS estimates by $0.02. The company generated a revenue of $936 million, up 33.33% year over year and ahead of Wall Street consensus by $114.50 million.
At the end of Q4 2022, Gen Digital Inc. (NASDAQ:GEN) was held by 34 hedge funds. These funds disclosed positions worth $1.17 billion in the company. As of December 31, Starboard Value LP is the top investor in the company and has a stake worth $405.3 million.
10. Leidos Holdings Inc (NYSE:LDOS)
Number of Hedge Fund Holders: 37
Leidos Holdings Inc (NYSE:LDOS) serves the defense, intelligence, civil, and health markets across the globe. At the close of Q4 2022, Leidos Holdings Inc (NYSE:LDOS) was spotted on 37 investors’ portfolios. These funds held collective stakes worth $615.2 million in the company, up from $409.7 million in the preceding quarter when 35 hedge funds held stakes in the company. The hedge fund sentiment for the stock is positive.
This February, Wells Fargo analyst Matthew Akers revised his price target on Leidos Holdings Inc (NYSE:LDOS) to $103 from $114 and maintained an Equal Weight rating on the shares.
As of December 31, Citadel Investment Group is the largest shareholder in Leidos Holdings Inc (NYSE:LDOS) and has a position worth $86 million.
Wedgewood Partners made the following comment about Leidos Holdings, Inc. (NYSE:LDOS) in its Q4 2022 investor letter:
“Leidos Holdings, Inc. (NYSE:LDOS) was a top contributor to portfolio performance during the 4th quarter. The Company ended the quarter with a strong adjusted book to bill ratio of about 1.4X. While the significant change in the global defense situation to date has caused some near-term pauses and noise around the ramping of different projects and priorities, Leidos is positioned exceedingly well as a defense contractor particularly to the U.S. and its allies, as we expect a significant increase in U.S. government defense and civilian spending during fiscal 2023. This increased spending should in turn flow through to Leidos’ order book, as they focus on modernizing IT environments and cybersecurity. We continue to hold Leidos has a top weighting as it still trades at historically attractive forward earnings multiple against the backdrop of a new “Cold War.””
Other top names in the cybersecurity space that are on hedge funds’ radars include Datadog, Inc. (NASDAQ:DDOG), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and Palo Alto Networks, Inc. (NYSE:PANW).
9. SentinelOne, Inc. (NYSE:S)
Number of Hedge Fund Holders: 38
On March 14, SentinelOne, Inc. (NYSE:S) announced earnings for the fourth quarter of fiscal 2023, in which the company beat EPS expectations by $0.03. The company reported a revenue of $126.10 million, up 92.11% year over year and ahead of market consensus by $1.41 million.
This March, Wedbush analyst Taz Koujalgi raised his price target on SentinelOne, Inc. (NYSE:S) to $22 from $19 and maintained an Outperform rating on the shares. The stock is placed ninth among the best cybersecurity stocks to buy now according to analysts and hedge funds.
38 hedge funds disclosed having stakes in SentinelOne, Inc. (NYSE:S) at the close of Q4 2022. The total value of these stakes amounted to $731 million. As of December 31, Third Point is the top stockholder in the company and has a position worth $214 million.
8. Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 40
This February, Wells Fargo analyst Andrew Nowinski raised his price target on Cloudflare, Inc. (NYSE:NET) to $75 from $55 and maintained an Overweight rating on the shares.
On February 9, Cloudflare, Inc. (NYSE:NET) reported market-beating earnings for the fiscal fourth quarter of 2022. The company generated a revenue of $274.70 million, up 41.89% year over year and ahead of Wall Street expectations by $0.63 million. The company reported an EPS of $0.06 and beat EPS estimates by $0.01.
At the end of the fourth quarter of 2022, 40 hedge funds were long Cloudflare, Inc. (NYSE:NET) and disclosed stakes worth $635.9 million in the company. This is compared to 53 positions in the preceding quarter with stakes worth $629 million. As of December 31, Marshall Wace LLP is the leading investor in the company and has a position worth $119.5 million.
Here is what Baron Funds had to say about Cloudflare, Inc. (NYSE:NET) in its Q3 2022 investor letter:
“We continued to build our position in Cloudflare, Inc. (NYSE:NET) during the quarter as the shares declined with the overall software space and the long-term risk/ reward balance became more compelling. The company reported a strong second quarter, with revenue growth accelerating to 54%, as well as better gross and operating margins. Third quarter guidance was also ahead of Wall Street expectations. Given Cloudflare’s proprietary network and massive global scale, its software products have a disruptive price-performance advantage over competitors. As the company introduces new products as well as disruptive packaging/pricing, its unit level economics should continue to improve over time, with the company already well ahead of its long-term gross margin target of 74%, reporting 78.9% for the second quarter. This drives strong cross/upselling activity with customers, reflected in strong net-dollar expansion rates in excess of 125%. Indeed, in the most recent quarters, customers purchasing five or more products reached 81% of the base, six or more products reached 70% of the base, and seven or more products reached 58% of the base. Enterprise penetration continues to be a key long-term driver, with 1,749 customers now spending over $100,000 annually with the company, growing 61% and now accounting for over 60% of total revenue. With approximately 152,000 paying customers at the end of last quarter, large enterprise customers still represent just 1% of total paid customers and thus a material growth opportunity in the coming years. We continue to have high confidence in the company’s ability to innovate at a rapid pace (announced 20 new products or enhancements in September alone), package and bundle with disruptive pricing, and take material share in its large and growing addressable markets.”
7. Zscaler, Inc. (NASDAQ:ZS)
Number of Hedge Fund Holders: 42
Zscaler, Inc. (NASDAQ:ZS) was a part of 42 hedge funds’ portfolios at the end of Q4 2022. These funds held collective positions worth $540.3 million in the company. As of December 31, Two Sigma Advisors is the most prominent stockholder in the company and has a position worth $80.9 million.
On March 3, Wells Fargo updated its price target on Zscaler, Inc. (NASDAQ:ZS) to $156 from $160 and reiterated an Overweight rating on the shares. Zscaler, Inc. (NASDAQ:ZS) is one of the best cybersecurity stocks to buy now according to analysts and hedge funds.
Here is what Artisan Partners had to say about Zscaler, Inc. (NASDAQ:ZS) in its Q4 2022 investor letter:
“Zscaler, Inc. (NASDAQ:ZS) provides cloud-based Internet security solutions. In the quarter, it announced 54% revenue growth and expected growth of nearly 40% in 2023 (ahead of expectations). Despite solid fundamental momentum, shares have underperformed this year as investors have grown concerned about slowing demand for enterprise software as the broader global economy slows. We believe the dual trends of rising security vulnerability and increased enterprise digitization will lead to sustained demand, even in a recession. Cybersecurity remains a top concern for businesses and governments alike as cyberattacks can have devastating financial and reputational consequences. Meanwhile, managing the security needs of legacy on-premise applications, a growing number of cloud-based applications (Office 365, Salesforce, etc.) and a more remote workforce (versus pre-pandemic) make operating IT infrastructures increasingly complex. Give the attractive long-term outlook and depressed valuations, we added to the position.”
6. Fortinet, Inc. (NASDAQ:FTNT)
Number of Hedge Fund Holders: 47
Fortinet, Inc. (NASDAQ:FTNT) is a global leader in cybersecurity and networking solutions. As of March 22, the stock has returned 26.15% to investors year to date. Fortinet, Inc. (NASDAQ:FTNT) ranks sixth on our list of the best cybersecurity stocks to buy now.
On February 14, Goldman Sachs analyst Gabriela Borges took coverage of Fortinet, Inc. (NASDAQ:FTNT) with a Buy rating and a $73 price target.
47 hedge funds disclosed having stakes in Fortinet, Inc. (NASDAQ:FTNT) at the close of Q4 2022. The total value of these stakes amounted to $1.88 billion, up from $1.74 billion in the previous quarter with 47 positions. As of December 31, Viking Global is the leading stockholder in the company and has a position worth $348 million.
In addition to Fortinet, Inc. (NASDAQ:FTNT), Datadog, Inc. (NASDAQ:DDOG), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and Palo Alto Networks, Inc. (NYSE:PANW) are also poised to benefit from the secular tailwinds in the cybersecurity space.
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Disclosure: None. 12 Best Cybersecurity Stocks to Buy Now is originally published on Insider Monkey.
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