Should you have cybersecurity stocks in your portfolio? For Matthew Carr, Chief Trends Strategist of The Oxford Club, the answer is definitely “yes.” However, as with anything related to picking stocks, it’s not so simple. While the overall environment is encouraging, the process of finding the a good performer presents more than a few challenges.
Why Carr Likes Cybersecurity Stocks Now
Carr is not your average armchair stock picker. The Club comprises an influential private, international investor network. At the Oxford Club, Carr serves as Editor of Strategic Trends Investor and The VIPER Alert. He’s realized outsized gains in the stock market repeatedly over the years.
You’ve got billions of devices being deployed, most of them highly insecure,” Carr said. “There’s a lot of business to be done in providing the needed security.”
In his view, many factors now point to an auspicious moment for cybersecurity stocks. These include the rise of the Internet of Things (IoT) and its attendant security risks. “You’ve got billions of devices being deployed, most of them highly insecure,” Carr said. “There’s a lot of business to be done in providing the needed security.” As a result, he favors stocks that support IoT security.
The COVID-19 pandemic is also creating buying opportunities for cybersecurity stocks, according to Carr. “The work from home wave, which looks to become long-term, if not permanent, is creating a huge variety of security risks for businesses,” he observed. “For this reason, companies that can help businesses mitigate home-based worker cyber risk are poised for strong earnings growth.”
Challenges in Selecting Cybersecurity Stocks
Carr acknowledges that the process of identifying the right opportunities in the market is far from easy. For one thing, the cybersecurity sector seems to experience waves of growth, followed by relatively fallow periods. It follows the tech sector in general, but not always.
One complicating factor comes from the basic issue of who is going to get the business when the security market picks up? As Carr revealed, in some cases, while a promising new company looks as if it can seize the market, the revenues actually flow to larger, more established players. “It can be a frustrating sector,” he noted.
“If you’re selling security into the Fortune 500, it’s easy to get bypassed by the IBMs and Accentures of the world, no matter how dazzling your IP might be.”
“If you’re selling security into the Fortune 500, it’s easy to get bypassed by the IBMs and Accentures of the world, no matter how dazzling your IP might be,” Carr shared. To avoid buying stocks of companies that look great, but can’t deliver in this way, it’s essential to pay extremely close attention to industry analysts and investor presentations to ferret out misalignments between a company’s core strengths and its addressable market.
M&A also arises as a distracting, but occasionally lucrative issue for Carr. “I don’t pick stocks based on the probability of the company being acquired, but in reality, there’s a lot of M&A in the space,” he said. “So, maybe you’ll get lucky—or the opposite—but it’s far wiser to focus on fundamentals like earnings performance and management team. It’s never boring, that’s for sure,” he concluded.
About Matthew Carr: Carr has spent nearly two decades covering the financial markets. He started off in oil and mining, covering natural gas, LNG, oil, gold and uranium, before moving to business-to-business credit, financial analysis and international trade finance.
Since 2009, he has been with The Oxford Club, primarily serving as the financial publisher’s Chief Trends Strategist. His expertise in cannabis, technology, small caps and cutting-edge trends has made him one of the most successful strategists in the industry.
He’s won The Oxford Club’s Peak Performance Award for the top portfolio in four of the last six years. And he set two records for the largest gains in the company’s history. First, with a 1,889% gain on Boston Beer. And then he broke his own record with a 2,733% payday on Columbia Sportwear.
He spearheads the e-letter Profit Trends, the newsletter Strategic Trends Investor, and the trading services Dynamic Fortunes, The VIPER Alert and Trailblazer Pro.