People want to be safe. Whether protecting personal information, securing payment networks, or harboring private data, security is necessary. The same holds true for investments.
The Problem
The raging global security phenomena and increasing political turmoil pose many threats to governments, institutions, companies, and people. Pondering our times can be frightening, especially when considering the expansion of web-based services. We ask ourselves “If a government agency was hacked, is my online banking information even secure?” Or, “Is my personal information safe on the web?”
I certainly would like to think so.
A Green Answer
As a result of rising cyber threats, some firms are poised to benefit. Check Point Software Technologies Ltd. (NASDAQ:CHKP) is leading the charge. This “worldwide leader in securing the internet” boasts exceptional commercial and financial stability.
For example, its new technology is able to detect evolving bot or phishing attacks that have wreaked havoc within global banks. Or, consider its recent certifications, which exceed American and International security standards.
Check Point Software Technologies Ltd. (NASDAQ:CHKP) is not just raking in awards, though. It is a cash generating machine. Over the past decade, it averaged a free cash flow rate of about 16.5% a year. Unfortunately for investors Checkpoint is not yet in a growth phase. It seems content where it is.
For instance, Check Point Software Technologies Ltd. (NASDAQ:CHKP) generates about 70 times more cash above the retained earnings level necessary to maintain its business operations. One of its competitors, Fortinet Inc (NASDAQ:FTNT), only makes about 6 times the cash needed to reinvest back into the firm. That said, even a multiple of 6 is phenomenal.
Credit: Check Point Software Technologies Ltd. (NASDAQ:CHKP)
However, I anticipate that the firm may shift to focus on growth in coming quarters. Regardless, because of market needs and niches, both firms are good picks.
CHKP Free Cash Flow data by YCharts
More Stable Solutions
For those that are risk averse, Mantech International Corp (NASDAQ:MANT) is your play. With an annual dividend yield of about 3.10%, investors can earn some extra income while riding the industry wave. Further, Man Tech is only valued at about 90% its book value and is engaging new markets. It expects that these segments “will drive our next phase of growth.”
Or, Sourcefire, Inc. (NASDAQ:FIRE) may become your new favorite stock. It is the least sensitive of the firms within its industry, and it has no debt. Additionally, the company’s current ratio is 3.13. According to analysts, this highly liquid, low sensitivity firm is undervalued by a minimum of 9%.
| Company Name | Beta |
|---|---|
| Check Point Software Technologies Ltd. (NASDAQ:CHKP) | 1.06 |
| Mantech International Corp (NASDAQ:MANT) | 1.24 |
| Fortinet Inc (NASDAQ:FTNT) | 1.83 |
| Sourcefire, Inc. (NASDAQ:FIRE) | 0.24* |
| Palo Alto Networks Inc (NYSE:PANW) | 1.04 |
| Data from Yahoo! Finance * .83 for Google Finance & MSN Money | |
One Last Measure
In The Little Book that Saves Your Assets, David Darst, Morgan Stanley’s Chief Investment Strategist of Global Wealth Management, informs readers how they can build a bullet proof portfolio. One of the strategies he suggests is tracking insider trades.
As Darst discusses, insider trading is not directly affiliated with the success or decline of a company. Both external and internal factors could affect insiders’ decision making processes. Regardless, investors who follow such transactions learn that it is a worthwhile endeavor.
The following chart shows a 6 month time period of insider trades:
| Company Name | No. of Selling Transactions | No. of Buying Transactions |
|---|---|---|
| Checkpoint Solutions | 0 | 3 |
| Mantech International Corp | 3 | 0 |
| Fortinet | 6 | 0 |
| Sourcefire, Inc. | 6 | 0 |
| Palo Alto Network | 34 | 0 |
| Data from Insider Monkey | ||
As shown, Check Point Software Technologies Ltd. (NASDAQ:CHKP) boasts the best record. Frankly, I am not surprised. One potential explanation for Palo Alto Networks Inc (NYSE:PANW)‘s large sell off is the negative press the firm has been receiving. The company’s recent earnings report missed expectations, further driving down the stock price. However, I remain bullish on this stock. Given Palo Alto’s recent price drop, I give it a definite buy–it is trading under value.
The firm continues to grab market share, and I believe it is positioned to break through its 3 month resistance of $56 a share.
Moving Forward
Despairing times often call for demanding measures like innovative security solutions. Thankfully, some firms understand the risks at hand and are running to provide solutions.
Brendan Marasco has no position in any stocks mentioned. The Motley Fool recommends Check Point Software Technologies Ltd. (NASDAQ:CHKP) and Sourcefire, Inc. (NASDAQ:FIRE). The Motley Fool owns shares of Check Point Software Technologies and Mantech International Corp (NASDAQ:MANT). Brendan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Don’t Overlook These Secure Safe Havens originally appeared on Fool.com.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
