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New Kids on the Cybersecurity Block: 4 Growth Stocks to Watch


Retail breaches lead to new names and gains in embedded-systems security stocks.

Technology has a habit of replacing the old with the new as start-ups steal the limelight with new ideas designed to solve ever-changing problems. Cybersecurity has received a lot of attention recently with the high-publicity security breaches at many retailers, including Target Corporation (NYSE:TGT). That increased visibility has contributed to huge gains in the software and embedded-systems security space. And the gains just keep on coming.

The two big names in the industry on the personal computer side used to be Symantec (NASDAQ:SYMC) and McAfee, which was bought out by Intel (NASDAQ:INTC). On the embedded-systems side, it was Check Point Software (NASDAQ:CHKP), Juniper Networks (NASDAQ:JNPR), and Cisco Systems (NASDAQ:CSCO). But with all the visibility in this space, these old names just don't cut the mustard compared to some of the up-and-coming ones.

The biggest gainer on the Russell 2000 (INDEXRUSSELL:RUT) so far this year is FireEye (NASDAQ:FEYE), with an incredible 150% spike in just two short months. When compared to the established companies, their performance pales in comparison.

Now sure, some of the move is just pure momentum at this juncture, but it's also about the technology. FireEye claims to anticipate problems and prevent infections rather than simply dealing with the infectious malware when it shows up.

Of course, FireEye isn't the only the new kid on the block. There are others, such as Proofpoint (NASDAQ:PFPT), Barracuda Networks (NYSE:CUDA), and Imperva (NYSE:IMPV). In all cases, these are growth stocks and are being treated as such. That means that if they can continue to show blockbuster growth, they will continue to attract new money; any slip-up on those numbers, however, is likely to result in a sharp setback.

The bottom line is that the space is fresh, it's in vogue, and it's attracting both momentum and new money. Although the increases are already huge, there's nothing to say that they can't continue over a longer period of time. As long as the general market remains supportive, there will be sectors that outperform. Just realize that where there are big numbers posted to the upside, there can be big numbers posted to the downside as well if they miss their growth targets, so don't gorge on these names. Yes, they can be traded, and with enough analysis, they can also be invested in -- but they do come with risk and promise a wild ride.

For up-to-date info showing anchored support zones to help measure your risk factor, here are some charts for each of the above (FireEye, Proofpoint, Barracuda Networks, Imperva).

Editor's note: L.A. Little is a professional trader, author, and money manager who has written several books and contributed material to many financial sites in addition to authoring his own: Technical Analysis Today. He brings a unique perspective to technical analysis, incorporating his extensive engineering and modeling skills when analyzing the markets.

Twitter: @tatoday
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