5 Best Cybersecurity Stocks Hedge Funds Are Buying

In this article, we will be taking a look at the 5 best cybersecurity stocks hedge funds are buying. To read our detailed analysis of the cybersecurity industry, you can go directly to see the 11 Best Cybersecurity Stocks Hedge Funds Are Buying.

Okta, Inc. (NASDAQ:OKTA)

Number of Hedge Fund Holders: 57

Okta, Inc. (NASDAQ:OKTA) is a provider of identity solutions for the management and security of user identities. The company is based in San Francisco, California.

Andrew Nowinski at Wells Fargo maintains an Overweight rating and a $95 price target on Okta, Inc. (NASDAQ:OKTA) as of August 31.

In total, 57 hedge funds were long Okta, Inc. (NASDAQ:OKTA) in the second quarter, with a total stake value of $905.3 million.

4. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)

Number of Hedge Fund Holders: 65

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) had 65 hedge funds long its stock in the second quarter, with a total stake value of $1.3 billion.

Based in Austin, Texas, CrowdStrike Holdings, Inc. (NASDAQ:CRWD) provides cloud-delivered protection. It offers corporate workload security, security and vulnerability management, and managed security services.

A Buy rating and a $185 price target were maintained on CrowdStrike Holdings, Inc. (NASDAQ:CRWD) by DA Davidson’s Rudy Kessinger on September 28.

3. Datadog, Inc. (NASDAQ:DDOG)

Number of Hedge Fund Holders: 78

Fatima Boolani at Citigroup maintains a Buy rating and a $125 price target on Datadog, Inc. (NASDAQ:DDOG) as of August 30.

Datadog, Inc. (NASDAQ:DDOG) operates an observability and security platform for cloud applications. It is based in New York.

In the second quarter, 78 hedge funds were long Datadog, Inc. (NASDAQ:DDOG). Their total stake value was $2.4 billion.

RiverPark Advisors said the following about Datadog, Inc. (NASDAQ:DDOG) in its first-quarter 2023 investor letter:

“Datadog, Inc. (NASDAQ:DDOG): DDOG was a top detractor in the quarter. The company reported strong 4Q results including 44% revenue growth and 30% earnings growth but gave cautious revenue guidance for 2023. Macroeconomic headwinds have caused clients to slow the transition of workloads to the cloud and instead to optimize current capacity. Despite this temporary slowdown, DDOG still expects revenue to grow nearly 25% in 2023.

As businesses have transitioned to cloud software infrastructure, much of which is in isolated data silos, it has become increasingly difficult for data engineers to monitor and analyze system performance. Datadog provides a SaaS software platform to monitor and analyze the system performance of software applications and IT infrastructure by giving users a single page view to observe their company’s technology stack. The company has quickly grown its revenue from $100 million in 2017 to $1.7 billion in 2022 and, we believe, should continue to grow revenue at more than 20% annually as it penetrates its $40 billion and fast-growing market. Less than 10% of software applications are currently monitored. The company’s dollar-based net retention rate has been 130%+ as existing customers continue to use an increasing number of products and the company continues to add new features. As of 4Q22, 81% of customers used 2+ products, while only 18% of customers used 6+ products (up from less than 1% two years ago). As an extremely capex light software business, DDOG already has significant free-cash-flow ($350m in 2022) and free-cash-flow margins (21% in 2022).”

2. Palo Alto Networks, Inc. (NYSE:PANW)

Number of Hedge Fund Holders: 83

Palo Alto Networks, Inc. (NYSE:PANW) is a provider of cybersecurity solutions worldwide. It is based in Santa Clara, California.

There were 83 hedge funds long Palo Alto Networks, Inc. (NYSE:PANW) in the second quarter, with a total stake value of $3.8 billion.

Citigroup’s Fatima Boolani maintains a Buy rating and a $285 price target on Palo Alto Networks, Inc. (NYSE:PANW) as of September 19.

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 300

Tyler Radke at Citigroup holds a Buy rating and a $420 price target on Microsoft Corporation (NASDAQ:MSFT) as of September 22.

At the end of the second quarter, 300 hedge funds were long Microsoft Corporation (NASDAQ:MSFT). Their total stake value was $69.8 billion.

Microsoft Corporation (NASDAQ:MSFT) is a big tech giant in the information technology industry. It offers a range of cloud security solutions such as Microsoft Defender, Microsoft Intune, and Microsoft Sentinel, among more.

ClearBridge Investments mentioned Microsoft Corporation (NASDAQ:MSFT) in its second-quarter 2023 investor letter:

“We initiated a small position in Microsoft Corporation (NASDAQ:MSFT) during the quarter, which may seem surprising given our concerns about index concentration. However, we seized the opportunity on a compelling entry point below our business value estimate, due to an anticipated acceleration of demand for Microsoft’s Azure cloud business and incremental revenues from integration of Microsoft’s AI Copilot program into its office platform. We believe this could support double-digit growth, while simultaneously solidifying Microsoft’s competitive position as an AI winner. Even as a small position, we believe Microsoft provides a large portfolio construction benefit given low correlation to the rest of the portfolio.”

See also 12 Most Advanced Countries in Cybersecurity and 12 Best Cybersecurity Stocks to Buy Now.