The best cybersecurity stocks are back in focus this week after new ransomware attacks called "WannaCry" were launched around the globe.
Even big institutions such as FedEx Corp. (NYSE: FDX), Britain's public health system, Chinese universities, and Russia's Interior Ministry, with all of their technical resources, were not immune. Over the weekend, there were initial reports of new cases found in Japan, South Korea, and Taiwan as well.
This attack was just the latest in a massive surge in cybercrime. Juniper Research recently estimated that the global cost of data breaches - hacks - will reach $2.1 trillion by 2019. That's nearly four times the estimated cost of cybercrime in 2015.
And Cybersecurity Ventures recently predicted that cybersecurity spending will top $1 trillion from 2017 to 2021.
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While the problem is getting bigger, it is actually creating an even better profit opportunity for investors...
As cybersecurity companies scramble to battle the attackers, the winners will reap the riches. And investors who buy the best cybersecurity stocks will benefit too.
We are talking about companies that provide the tools to prevent hacking and cyberattacks as well as the tools that help repair the damage after attacks are made.
Although investing directly in the biggest winners in the sector can be a potential gold mine, Money Morning Chief Investment Strategist Keith Fitz-Gerald says the cybersecurity sector is a complicated field with thousands of players. It'll be hard to sort out the winners because many won't make it.
But we've found two ways for investors to profit from the best cybersecurity stocks in 2017, without having to pick through thousands of companies...
How to Profit from the Best Cybersecurity Stocks Now
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Fitz-Gerald's favorite play in the cybersecurity sector is Raytheon Co. (NYSE: RTN), which provides government markets around the world with state-of-the-art electronics, mission systems integration, and other weapons capabilities.
While Raytheon has been around since 1922, the company is now focusing heavily on cybersecurity. In 2016, Raytheon reaffirmed a $1 billion contract with the Department of Homeland Security to help safeguard the agency's data from cyberattacks.
"Raytheon's cybersecurity division, Forcepoint, more than tripled net sales in 2015, bringing in $328 million compared to $104 million in 2014," Fitz-Gerald said. "That's a surge that's roughly in line with the speed in which the cybersecurity sector is growing, and confirmation that we're on the right track."
In 2017, RTN stock has nearly tripled the returns of the Dow, climbing more than 11% in just over five months.
"With costs of data breaches projected to total an astonishing $2.1 trillion by 2019, Raytheon will have the luxury of operating in - and maybe dominating - a market that's crying out for cybersecurity services and technology," Fitz-Gerald said.
For investors looking for cybersecurity exchange-traded funds (ETFs), Money Morning Director of Tech & Venture Capital Research Michael A. Robinson's favorite play is the PureFunds ISE Cyber Security ETF (NYSE Arca: HACK).
HACK is made up of 40 top cybersecurity companies that are fighting issues like insider misuse, denial of service attacks, point-of-sale theft, and cyber espionage. The HACK ETF removes single-stock risk and allows investors to participate in the gains - whether big or small - of many companies at the same time.
HACK has been rallying for more than a year and has outperformed the Standard & Poor's 500 by about 27% over that span. Its bullish trend is still intact, and even before the recent spate of attacks the stock exploded higher from a resting phase. That suggests smart money was anticipating big news.
Of course, nobody knew exactly the extent and the timing of the next attack, but those in the know were buying the dips all year. Money flowed into the ETF even though its price was mostly flat between February and May. That suggests solid demand for shares.
When Robinson first recommended investing in the cybersecurity ETF last year, he said it had the potential to double and triple as cybersecurity becomes an even bigger issue. This past week's events prove that cybersecurity is already becoming more pressing.
The ETF is up roughly 40% since his recommendation, and that means Robinson's analysis looks for plenty more upside ahead.
With so much at stake - financial transactions, medical privacy, identity theft, and simple malicious mischief - companies, institutions, and governments are faced with a great need to stay secure. The demand for cybersecurity is growing, and that presents great opportunities for these companies and the investors that own them.
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