What Investors Need To Know About Cybersecurity

Another day, another hack. This week home improvement company Home Depot HD reported a breach of its online systems and has reportedly hired Symantec Corp. SYMC and Fishnet Security to help determine if any customer information was stolen.

Over the Labor Day weekend social media was in a frenzy over a hacker who had obtained compromising photos of several celebrities, likely pilfered from their Apple, Inc. AAPL iCloud accounts. The official Apple statement indicated that a systematic attack of its systems was not the cause of the incident. 

A few weeks ago the banking giant JP Morgan Chase JPM was breached, reportedly by hackers operating inside Russia. 

Related link: 3 Cybersecurity Firms To Watch Amid JP Morgan Breach

What does all this mean for investors?

Profitting from chaos?

In the short-term, cybersecurity firms like Symantec and FireEye FEYE might be able to profit from the recent breaches that seem to be occuring more often. The free publicity that some of these companies are getting in the nonfinancial media could result in a bump in the stock price. FireEye stock jumped over 20% in the days imediately after the the JP Morgan hack was reported.

However, over the long-term the publicity will most likely fade and the direction of the stock will be influenced by the underlying fundamentals of the companies. 

For example, FireEye, a relatively new company, is growing revenue but is not yet profitable. Ref: {http://caps.fool.com/Ticker/FEYE.aspx}Over the past year Symantec has reported double-digit EPS growtrh but revenue has basically flatlined over the past few years. {Ref.http://caps.fool.com/Ticker/SYMC/EarningsGrowthRates.aspx?source=icasittab0000008}

Bad press

Likewise for the companies that were targets of hackers, Home Deport, Apple, and JP Morgan, the bad publicity might affect the stock in the short-term but fundamentals will still rule for patient, forward-looking investors.

In the case of Apple, all eyes will be on the forthcoming media event that the company has scheduled for September 9. It is probable the tech giant will announce its latest iPhone model, and possibly even the "iWatch", the first new product category coming out of Cupertino in over four years. Since Apple derives the majority of its success from the smartphone, and with a potential new revenue source on the horizon, it will important to see what is in the offering from the company in a few days.

Conclusion
Highly publicized hacking incidents might be profittable in the short-term for some investors but it is more likely that the underlying fundamentals of both the protection firms and the targets of the attacks will influence the returns that investors are likely to see.