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The growing threat of cyber attacks is corporations' biggest concern in 2014 – but it could also be your biggest profit opportunity.
Even when broader markets fell in January, cybersecurity stocks delivered double-digit gains. FireEye Inc. (Nasdaq: FEYE) surged a whopping 67%, KEYW Holding Corp. (Nasdaq: KEYW) climbed 19%, and Imperva Inc. (NYSE: IMPV) rose 14% in the year's first month.
But these gains are modest compared to how high these stocks can go.
That's because the need for U.S. companies to protect against cyber attacks is higher than ever before. Cyber attacks on companies increased 42% in 2012 from a year before. And look at what's happened so far in 2014:
- On Jan. 11, luxury retailer Neiman Marcus confirmed that hackers gained access to their customer service database and made unauthorized charges throughout the holiday season. The company first reported that suspicious activity started in mid-December, but more recent reports say it started in July 2013 and was not fully contained until Jan. 12.
- On Jan. 13 retail giant Target Corp. (NYSE: TGT) issued a written apology for a cybersecurity breach that included payment data for around 40 million customers who had used credit or debit cards at their retail outlets between Nov. 27 and Dec. 15. Target discovered in January that the breach also included home addresses, phone numbers, email addresses, and names for at least 70 million customers, meaning roughly 110 million customers were impacted overall.
- And on Jan. 14, JPMorgan Chase & Co. (NYSE: JPM) Chief Executive Officer Jamie Dimon said that the bank is replacing around 2 million debit and credit cards because of the large number of recent cybersecurity attacks.
"Unfortunately, this cybersecurity stuff we've now pointed out for a year is a big deal, it's not going to go away," Dimon said. "All of us have a common interest in being protected, so this might be a chance for retailers and banks to, for once, work together as opposed to sue each other like we've been doing the last decade."
Now companies are projected to spend $67 billion in information security this year, according to tech research firm Gartner. Security spending will increase by around 39%, to $93 billion, by 2017.
"I can't point to anything with a better secular backdrop than security right now, given the rate of technological change and the impact of mobile and applications on security," Rob Owens, head of Pacific Crest Securities, told Barron's.
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