4 Stocks to Buy in the Exploding Cybersecurity Market

There's a story out of England I heard recently that's one of the most ironic tales of how developments in technology - cybersecurity, in particular - need to be taken more seriously.

The story started in 2009, when 18-year-old Nicholas Webber was arrested for using fraudulent credit card details to pay for a penthouse suite at the Hilton Hotel in Park Lane, Central London.

When police examined Webber's laptop, they found details of 100,000 stolen credit cards linked to losses totaling 16.2 million pounds ($24.6 million)

Turns out Webber ran the Internet crime forum GhostMarket. The site allowed hackers to meet up virtually, create computer viruses and share stolen IDs and private credit card data.

In 2011 Webber was sentenced to five years in prison. Once in prison Webber was allowed to participate in a computer class.

And earlier this year, he hacked the prison computer system.

The prison claimed that the network was closed and no personal information was exposed - although U.K.'s Daily Mail reported that the crime caused a "major panic."

The fact is, Webber is a cybercriminal; allowing him to enroll in a computer class was like giving matches to an arsonist.

And if cybersecurity and information security (infosec) measures aren't supported, there are going to be more Webbers hacking their way to very private and vulnerable information.

The United States is getting the hint. U.S. President Barack Obama mentioned cyberattacks in his State of the Union speech as posing "real threats" to our security and economy. Corporations are starting to learn the hard way that compromised data is very expensive to clean up - much more expensive than protecting it in the first place.

4 Stocks to Buy as Cybersecurity Rules the Future

One of the best places to look for info on the new era of cybersecurity and infosec is the Defense Advanced Research Projects Agency (DARPA) - you know, the folks who pretty much invented the Internet.

Two big projects they're working on in this space are Active Authentication (AA) and an Integrated Cyber Analysis System (ICAS). The former is an effort to authenticate users on secure systems without the need for passwords. The latter is an effort to make system information readily useful for attack forensics and tactical cyber defense in real time.

BASF SE (BASFY) is one of big players in the AA work DARPA is doing now. It's a good company; I've been saying for years that this chemical and materials giant is the DuPont of the 21st Century.

Another niche player in this new space is Applied DNA Sciences (APDN). It delivers counterfeit protection, brand authentication, combats product diversion, and offers its programs against cash-in-transit crimes, using the proven forensic power of DNA.

Counterfeit parts is a huge issue in the defense industry as well as it is in high-end textile manufacturing and many other industries. This company "tags" products with DNA to verify their identity.

And the U.S. military is on board. That's a very big client. On Nov. 15, 2012, the DoD procurement arm, Defense Logistics Agency (DLA), issued a directive that all 5,962 microcircuits provided by contractors must be marked with botanically-derived SigNature DNA from APDN.

Not only is this a large step forward for the technology, it's a ringing endorsement of this company's approach. This could be a big takeover target in coming years as big military contracts get thinner and value-added tech services like this get bigger.

Similarly, IceWEB Inc. (IWEB) is an interesting little company that has a toe-hold in the military infosec space. It designs, builds and maintains secure cloud servers for private and public organizations that need highly secure data storage and retrieval. The value here is its client list and again, this is an interesting takeover target in the defense/civilian space.

One thing to note for investors: IceWeb and Applied DNA are both penny stocks, meaning they're more volatile and speculative than others.

Another variation on the cybersecurity theme is NQ Mobile Inc. (NYSE ADR: NQ), a mobile security company that has integrated mobile games and advertising into its arsenal. The company's Consumer Mobile Security revenue increased 69.4% year-over-year and 7.0% sequentially to $19.6 million in the fourth quarter of 2012. Enterprise Mobility revenue increased 49.1% sequentially to $6.7 million in the fourth quarter of 2012 due to the strong growth in the enterprise business and new customer gains.

NQ Mobile hit our radar screen last year, when our Private Briefing investment service released its list of stocks to buy in 2012. The stock soared as high as 153% after its recommendation.

This year, we have our sights on another data security firm, one we think could go as high as 55% -- and is looking like a hot takeover target for 2013. Just go here to find out how you can get this company's name - as well as all the picks in our Private Briefing subscriber-only report, "The Seven Investments You Have to Make in 2013."