Best Cybersecurity Stocks Right Now

Technology changes the world at a rapid pace and nowhere is that growth more evident than the cybersecurity sector. About 40 years ago, computer system security was a concern only of the largest corporations and governments. Now, every citizen with a smartphone needs some form of protection from malicious attacks, and most of the time they don’t even realize when an intrusion has been thwarted.

We have more data passing through more systems than ever. The internet has introduced many conveniences to our lives but has created some vulnerabilities to our personal information. Companies sprang to answer the call to curb and prevent security breaches — cybersecurity firms have grown a nonexistent sector into a multibillion business. And with COVID-19 looming over social and business activity for the foreseeable future, keeping digital assets secure becomes even more crucial.

Overview: Cybersecurity Stocks

Cybersecurity is a huge industry today, but the need for it was nonexistent until the 1970s. Back during the days of the ARPANET (the predecessor of the Internet), a programmer named Bob Thomas made a discovery. He realized he could use a computer program to spread from system to system within the network, accessing any terminal he wanted. Thomas had no sinister intent with his program — it simply posted a message on other computers saying, “I’M THE CREEPER. CATCH ME IF YOU CAN.”

The Creeper was eventually caught by the Reaper. Reaper was the original antivirus program, written by Ray Tomlinson and given the directive of finding and deleting the Creeper program. Thus, the cybersecurity field was born. But the attacks soon became much more malicious.

The first denial-of-service (DoS) attack happened in 1988, from a code written by MIT graduate student Robert Morris. Morris’s computer worm tore through college computer systems, creating massive slowdowns and crippling the newborn internet. The code replicated uncontrollably, although it didn’t contain any harmful instructions or do damage to files. 

Morris’s objective remains ambiguous (some sources theorize the code was released entirely by accident), but the internet slowdowns did cause monetary damage and Morris was tried and convicted under the Computer Fraud and Abuse Act. However, the Morris worm paved the way for many of today’s most malignant viruses and malware.

Today, cybersecurity is more important than ever because attackers are getting more and more clever. Both federal offices and private companies like Target, Equifax and Yahoo have been hacked and millions of people have had their personal information exposed. Ransomware attacks like the WannaCry virus are particularly nefarious since they basically hold computer systems hostage for payment. New threats are always lurking.

The cybersecurity industry is currently a multibillion market and is expected to grow to $270 billion and beyond by 2026. Plus, advances in AI development should speed up the efficiency and implementation of cybersecurity systems. Investing in cybersecurity firms seems like a slam dunk, but you still need to pick good companies. Like any market sector, the most profitable business models can still be sunk by bad management and excessive debt.

Best Online Brokers for Cybersecurity Stocks

Choosing the best broker for your trading style is an important step for any investor. Buy-and-hold investors and swing traders benefit from commission-free online brokers because trades no longer cost $5 to $7 a pop and order routing doesn’t matter as much when you’re holding overnight.  

Day traders who use sophisticated techniques might prefer direct access brokers that charge commissions per share. If you need pricing down the penny, you’ll want control over your order trajectory — that requires direct access, not a broker with a trading desk.

Features to Look for in Cybersecurity Stocks

Choosing the best cybersecurity stocks for your portfolio doesn’t require much of a changeup from the usual program. You’re looking for companies that are growing revenue and improving margins without piling on the debt. But keep in mind the nature of the cybersecurity industry, too — running with the hackers requires diligent work.

• Revenue growth: Most of us think cybersecurity is the virus-protection program on our laptops or the 256-bit encryption of data we enter into our phones. But cybersecurity comes in all shapes and sizes, and most firms have a diverse list of public and private clients. The best stocks in the sector will be revenue growers.

Cybersecurity Might Deserve a Slice of Your Portfolio

The economy is going online, at least for the time being. Businesses will continue to keep as many workers operating from home as possible during the pandemic, which will improve their personal health but possibly not the health of their devices. There’s more data than ever and hackers have more opportunities to exploit weaknesses in our computer security systems.

Spending on cybersecurity will inevitably increase. Keeping an eye on current trends is important when following this sector as new threats are constantly emerging. Be sure to research how each company plans on staying ahead of the curve before investing in their stock.

Ready to start investing in cybersecurity stocks? Check out other ways to invest in the technology sector, the best tech stocks and our picks for the best online brokerage.