Defense and aerospace firms still won government contracts despite the war that did not happen in the year. Countries still must protect their borders by investing in the space. In the year ahead, cyber-attacks will become an increasingly frequent occurrence. Investors should get bullish on cybersecurity firms.
Crowdstrike (CRWD) is a leading cybersecurity firm. Corporations need to protect their infrastructure from cyber attacks and will need this firm’s solutions. Infrastructure suppliers like Zscaler (ZS), Okta (OKTA), Fortinet (FTNT), Sailpoint (SAIL), and Cloudflare (NET) will give investors exposure in the cybersecurity space.
Investing in the sector does not come without risk. Valuations are unfavorable. For example, SentinelOne (S) trades at an 80 times price-to-sales ratio. CRWD stock trades at a 37 times P/S. A repeat technology sell-off would hurt those stocks. Investors are buying into cybersecurity software growth for the next decade or longer. The margin of safety is very low.
Technology investors may wait for a strong pullback before considering this sector. Conversely, selling calls or puts would lower the price paid for shares. Microsoft (MSFT) includes antivirus software in its operating system. The stock has steady cash flow growth and is relatively inexpensive. Cisco (CSCO) supplies a secure network for customers and it is worth considering, too.
