Cybersecurity
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See also National Security
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AWK $137
09 Oct 2024 |
The largest water utility firm in the US hit by a cyberattack; just the latest attempt to disrupt our critical infrastructure
American Water Works (AWK $137) is the largest investor-owned water utility company in the United States, serving some 3.5 million customers across 16 states. This week, the company reported that it has been the victim of a cyberattack. While the investigation is ongoing, AWK has stressed its belief that none of its water treatment facilities have been impacted, and that the water remains safe to drink. This past January, a Russian-linked hack of a water-filtration plant near Cannon Air Force Base, Texas was uncovered. The following month, FBI officials warned the US Congress that Chinese hackers had penetrated America's infrastructure, targeting water treatment plants and the electrical grid. According to the EPA, over two-thirds of all water systems inspected do not fully comply with the Safe Drinking Water Act with respect to security measures in place. While much—if not most—of the physical infrastructure of America's water supply system is in serious need of an upgrade, the EPA findings also pointed to lax behavior among workers and management at the facilities the agency inspected. Failure to update old or default passwords, outdated computer systems, and former employees still having the credentials needed to log into the systems were among the most common citations. With China, Russia, Iran, and North Korea constantly working to infiltrate and disrupt America's infrastructure, a strong and coordinated response is needed now. Simply reporting after the fact, as in the American Water Works case, is not enough. A team of white hat hackers should be deployed, constantly pushing to access the systems in an effort to uncover vulnerabilities, with the appropriate fixes immediately put into place. The Cybersecurity and Infrastructure Security Agency (CISA), under the Department of Homeland Security, needs to spearhead this effort.Three years ago we wrote of an attack on a water treatment facility in Florida, and the attempts of Iranian-backed hackers to disrupt Israeli water-treatment facilities by pumping increased amounts of chlorine into the system. We can only expect this form of cyberwarfare to increase. |
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CRWD $268
23 Jul 2024 |
After CrowdStrike's epic software update fail, are shares a buy?
It was supposed to be just a routine software update. Instead, CrowdStrike's (CRWD $268) flawed code left thousands of airline passengers stranded, investors unable to make trades, hotels unable to take reservations, and millions of Windows users unable to perform the most basic of functions on their Microsoft programs. A senior Microsoft IT officer used the analogy of a driver putting corrupted fuel in their gas tank—traveling throughout your car, it could affect any number of systems. While the disaster affected "only" 1% of all Windows-based devices, or some 8.5 million machines, it was one of the worst worldwide global IT outages in history. Not only was CEO George Kurtz excoriated in the media, investors showed their frustration by pounding the share price down. In the week prior to the incident, CRWD shares hit an all-time high of $398.33; on the Monday following the failure, shares closed at $263.91—a 34% drop. But was this outage a systemic problem which warranted the drop, or have investors been presented with a golden opportunity to buy in at a discount?Financially, the cybersecurity leader is sound. Sitting on a mound of $3.7 worth of cash, the company only has $742 million worth of debt. Its debt-to-equity ratio is an enviable 29%. But Crowdstrike, which provides next-gen endpoint protection, threat intelligence, and cyberattack response services, faces plenty of competition. Yes, it is the market leader, but many large public cloud vendors are now offering their own cyber solutions to clients, and vendors like Fortinet (FTNT $58), Palo Alto Networks (PANW $338), and Bitdefender are gaining endpoint security market share. Furthermore, last fiscal year was the first in which the firm turned a profit, despite its dominance. Investors probably don't want to rush in unless they were close to pulling the trigger on this company before the event. We own a number of cybersecurity names in the Penn strategies, but CrowdStrike is not directly one of them. As this recent event makes clear, investing in any one specific name carries extra risk, which is why the First Trust NASDAQ Cybersecurity ETF (CIBR $57) is one of our largest holdings. It contains thirty dominant players in the space; names like Palo Alto Networks, Cloudflare, and, yes, CrowdStrike Holdings. |
Use diligence before clicking on that "unsubscribe" button at the bottom of spam emails
(06 Jul 2021) Remember when it was actually fun to find new emails waiting to be opened in your inbox? A few of us even remember AOL's iconic "you've got mail" notification. How times have changed. Americans are now inundated with mountains of new emails each and every day, and trying to cull the weeds from the garden can be challenging, to say the least. Instead of just whacking away by deleting them, knowing they are destined to return, many of us have tried to eradicate them using the mandatory (at least we thought it was) "Unsubscribe" button located in microscopic print somewhere near the bottom of each piece. We recently began to wonder, though, if the sage advice of not clicking on any link we're not extremely familiar with also held true for this innocuous little "opt out" key. In fact, it turns out that malicious emails can, indeed, have unsubscribe links that lead to dangerous sites which can compromise or even infect your system with a virus. According to cybersecurity firm McAfee, following a few simple rules can help keep your system—and the treasure trove of data it probably holds—safe(r) from the dark web. If the email is from a legitimate company with which you are familiar, it should be safe to take a minute of your valuable time and go through the unsubscribe process. (Most are simple, others are purposefully irritating, making you put in the email address where they sent their junk!) If the email is from a company you don't recognize or one that seems a bit fishy, do not hit the unsubscribe link, just delete the email. For nefarious individuals and the algorithms they devise, this verifies that they have made a successful hit on a "validated" email address. If this is the case, the best scenario is more unwanted email heading your way. An uglier possibility is that the simple act of clicking on an unsubscribe button or link can lead to a virus being downloaded to your system. Another reason it pays to have good antivirus software protecting your system at all times. Bottom line: simply delete or move to spam/junk any email that appears suspicious. In addition to having a strong web protection system installed on all of your devices, be sure and have it run scans on your system on a regular basis. Always keep your operating system up-to-date as well, as new malicious efforts are constantly being identified by software developers.
(06 Jul 2021) Remember when it was actually fun to find new emails waiting to be opened in your inbox? A few of us even remember AOL's iconic "you've got mail" notification. How times have changed. Americans are now inundated with mountains of new emails each and every day, and trying to cull the weeds from the garden can be challenging, to say the least. Instead of just whacking away by deleting them, knowing they are destined to return, many of us have tried to eradicate them using the mandatory (at least we thought it was) "Unsubscribe" button located in microscopic print somewhere near the bottom of each piece. We recently began to wonder, though, if the sage advice of not clicking on any link we're not extremely familiar with also held true for this innocuous little "opt out" key. In fact, it turns out that malicious emails can, indeed, have unsubscribe links that lead to dangerous sites which can compromise or even infect your system with a virus. According to cybersecurity firm McAfee, following a few simple rules can help keep your system—and the treasure trove of data it probably holds—safe(r) from the dark web. If the email is from a legitimate company with which you are familiar, it should be safe to take a minute of your valuable time and go through the unsubscribe process. (Most are simple, others are purposefully irritating, making you put in the email address where they sent their junk!) If the email is from a company you don't recognize or one that seems a bit fishy, do not hit the unsubscribe link, just delete the email. For nefarious individuals and the algorithms they devise, this verifies that they have made a successful hit on a "validated" email address. If this is the case, the best scenario is more unwanted email heading your way. An uglier possibility is that the simple act of clicking on an unsubscribe button or link can lead to a virus being downloaded to your system. Another reason it pays to have good antivirus software protecting your system at all times. Bottom line: simply delete or move to spam/junk any email that appears suspicious. In addition to having a strong web protection system installed on all of your devices, be sure and have it run scans on your system on a regular basis. Always keep your operating system up-to-date as well, as new malicious efforts are constantly being identified by software developers.
Despite the company's original denials, Colonial Pipeline reportedly paid hackers $5 million in ransom
(14 May 2021) A few months ago, we reported about a hack on a municipal water treatment plant in Florida. The hacker was attempting to adjust the chlorine level in the city’s water supply to toxic levels. That attack was thwarted by an attentive city worker who noticed a mouse cursor mysteriously moving on his computer screen. This past week brought us news of a successful hack on the Colonial Pipeline, the largest pipeline for refined oil products in the US. The 5,500-mile-long system, which carries 3 million barrels of fuel per day between Texas and New York, was shut down for days, causing massive gas lines along the East Coast. While the company initially denied paying ransom to the hackers, it now appears that $5 million was, indeed, paid to a group known as DarkSide shortly after the attack occurred. DarkSide is a highly sophisticated criminal organization based out of Eastern Europe, with definite Russian connections. The cybercriminals use ransomware to lock a victim’s system, promising to provide the digital “keys” to unlock the system once the monetary demands are met. Experts are surprised that the amount demanded in this case was so low; normally, with a company of this size and services with such a broad scope, a $30 million demand would not be out of the ordinary. Ransomware attacks on firms of all sizes more than tripled in 2020, with victims ponying up over $350 million in crypto ransoms. As is typical following such an attack, the US government said it would be setting up a task force to counter these threats. Sadly, these promises always seem to come along after the damage is done. This is yet another sobering reminder of just how vulnerable American companies and individuals are to cybercriminals, and how disruptive a simple digital act of aggression can become, literally overnight. While it is up to the government to go after the bad actors and nation-states involved in these crimes, it is up to each American to take all possible measures to assure their own system’s security profile is as robust as possible. On the personal defense front, we have found Bitdefender to be one of the best cybersecurity suites on the market, for both PCs and MacBooks. Kaspersky ranks highly on most lists, but it is headquartered in Russia, which makes us immediately suspicious. From an investment standpoint, we believe the First Trust NASDAQ Cybersecurity ETF (CIBR $43) is an effective way to invest in the growing need for digital protection. We own CIBR as a satellite position within the Penn Dynamic Growth Strategy.
(14 May 2021) A few months ago, we reported about a hack on a municipal water treatment plant in Florida. The hacker was attempting to adjust the chlorine level in the city’s water supply to toxic levels. That attack was thwarted by an attentive city worker who noticed a mouse cursor mysteriously moving on his computer screen. This past week brought us news of a successful hack on the Colonial Pipeline, the largest pipeline for refined oil products in the US. The 5,500-mile-long system, which carries 3 million barrels of fuel per day between Texas and New York, was shut down for days, causing massive gas lines along the East Coast. While the company initially denied paying ransom to the hackers, it now appears that $5 million was, indeed, paid to a group known as DarkSide shortly after the attack occurred. DarkSide is a highly sophisticated criminal organization based out of Eastern Europe, with definite Russian connections. The cybercriminals use ransomware to lock a victim’s system, promising to provide the digital “keys” to unlock the system once the monetary demands are met. Experts are surprised that the amount demanded in this case was so low; normally, with a company of this size and services with such a broad scope, a $30 million demand would not be out of the ordinary. Ransomware attacks on firms of all sizes more than tripled in 2020, with victims ponying up over $350 million in crypto ransoms. As is typical following such an attack, the US government said it would be setting up a task force to counter these threats. Sadly, these promises always seem to come along after the damage is done. This is yet another sobering reminder of just how vulnerable American companies and individuals are to cybercriminals, and how disruptive a simple digital act of aggression can become, literally overnight. While it is up to the government to go after the bad actors and nation-states involved in these crimes, it is up to each American to take all possible measures to assure their own system’s security profile is as robust as possible. On the personal defense front, we have found Bitdefender to be one of the best cybersecurity suites on the market, for both PCs and MacBooks. Kaspersky ranks highly on most lists, but it is headquartered in Russia, which makes us immediately suspicious. From an investment standpoint, we believe the First Trust NASDAQ Cybersecurity ETF (CIBR $43) is an effective way to invest in the growing need for digital protection. We own CIBR as a satellite position within the Penn Dynamic Growth Strategy.
Private equity firm Thoma Bravo makes bid for cybersecurity firm Proofpoint, sending shares soaring
(26 Apr 2021) Going into the week, Proofpoint (PFPT $173) was a $7.5 billion cloud-based cybersecurity firm with a suite of offerings for mid- to large-sized companies. As of Monday's open, the company's offerings remained the same but its market cap was suddenly sitting near $11 billion thanks to an unsolicited bid by private equity firm Thoma Bravo. The deal, which would take the firm private, is worth $12.3 billion, or $176 per share, and comes with a 45-day "go-shop" provision which would allow other bids to be reviewed. Thoma Bravo, which specializes in software and cybersecurity acquisitions, just completed a $10 billion deal to buy RealPage, a provider of property management software for the commercial, single-family, and vacation rental housing industries. Barring any other offers, the Proofpoint deal should close in the third quarter. Proofpoint is one of the top holdings in the First Trust NASDAQ Cybersecurity ETF (CIBR $45), a satellite holding within the Penn Dynamic Growth Strategy. While selecting individual cybersecurity names can be challenging for investors, we maintain that the best way to take part in this ever-growing industry is through a strong exchange traded fund, such as CIBR.
(26 Apr 2021) Going into the week, Proofpoint (PFPT $173) was a $7.5 billion cloud-based cybersecurity firm with a suite of offerings for mid- to large-sized companies. As of Monday's open, the company's offerings remained the same but its market cap was suddenly sitting near $11 billion thanks to an unsolicited bid by private equity firm Thoma Bravo. The deal, which would take the firm private, is worth $12.3 billion, or $176 per share, and comes with a 45-day "go-shop" provision which would allow other bids to be reviewed. Thoma Bravo, which specializes in software and cybersecurity acquisitions, just completed a $10 billion deal to buy RealPage, a provider of property management software for the commercial, single-family, and vacation rental housing industries. Barring any other offers, the Proofpoint deal should close in the third quarter. Proofpoint is one of the top holdings in the First Trust NASDAQ Cybersecurity ETF (CIBR $45), a satellite holding within the Penn Dynamic Growth Strategy. While selecting individual cybersecurity names can be challenging for investors, we maintain that the best way to take part in this ever-growing industry is through a strong exchange traded fund, such as CIBR.
A massive Chinese hack hits Microsoft...and some 60,000 of its organizational and corporate customers
(09 Mar 2021) While there may not be a "hot" war raging between the United States and both China and Russia, the actions of these two nation-states clearly indicate that they are at battle with this country. What it will take for the United States to get on a war footing is unclear, as thousands of victims continue to fall prey to these adversaries. The latest attack took place within the Microsoft Exchange—a mail and calendar server used by some 200 million individuals and corporations. Unlike the cowardly stance taken by Amazon (AMZN), at least Microsoft has been forthcoming with respect to the attacks made on its systems, and has been willing to identify the culprits to help other companies better protect their customer data. This latest attack, according to the company, was perpetrated by a Chinese-sponsored group known as Hafnium. This group typically targets infectious disease researchers, defense contractors, and other critical agencies in an effort to both steal knowledge and cause general disruption. Adding insult to injury, the group gets its guidance from the Chinese government but uses servers it leases within the United States. The hackers first gained access to the Exchange by exploiting previously-unknown vulnerabilities, then created a malicious web-based interface to take control of the compromised servers remotely. Finally, they used this remote access to steal data from the targeted individuals and organizations. While Microsoft has identified and patched the vulnerability, the perpetrators already in the "body" may still operate untouched. In other words, they were already on the inside when the patch was put in place. While a serious federal response is needed, which includes an ongoing series of counterstrikes to send a message, companies and individuals must take responsibility and adopt next-level security practices such as multi-factor authentication and deployment of the highest possible level of cybersecurity protection. Unfortunately, these measures will be irritating and costly, but it sure beats the alternative. We praise Microsoft for having the guts to be transparent with regard to these attacks, and encourage timid firms like Amazon to follow suit. For investors, cybersecurity—sadly—will be one of the hottest industries for the foreseeable future. We recommend scanning the Penn holding CIBR, the First Trust NASDAQ Cybersecurity ETF, for individual names to consider.
(09 Mar 2021) While there may not be a "hot" war raging between the United States and both China and Russia, the actions of these two nation-states clearly indicate that they are at battle with this country. What it will take for the United States to get on a war footing is unclear, as thousands of victims continue to fall prey to these adversaries. The latest attack took place within the Microsoft Exchange—a mail and calendar server used by some 200 million individuals and corporations. Unlike the cowardly stance taken by Amazon (AMZN), at least Microsoft has been forthcoming with respect to the attacks made on its systems, and has been willing to identify the culprits to help other companies better protect their customer data. This latest attack, according to the company, was perpetrated by a Chinese-sponsored group known as Hafnium. This group typically targets infectious disease researchers, defense contractors, and other critical agencies in an effort to both steal knowledge and cause general disruption. Adding insult to injury, the group gets its guidance from the Chinese government but uses servers it leases within the United States. The hackers first gained access to the Exchange by exploiting previously-unknown vulnerabilities, then created a malicious web-based interface to take control of the compromised servers remotely. Finally, they used this remote access to steal data from the targeted individuals and organizations. While Microsoft has identified and patched the vulnerability, the perpetrators already in the "body" may still operate untouched. In other words, they were already on the inside when the patch was put in place. While a serious federal response is needed, which includes an ongoing series of counterstrikes to send a message, companies and individuals must take responsibility and adopt next-level security practices such as multi-factor authentication and deployment of the highest possible level of cybersecurity protection. Unfortunately, these measures will be irritating and costly, but it sure beats the alternative. We praise Microsoft for having the guts to be transparent with regard to these attacks, and encourage timid firms like Amazon to follow suit. For investors, cybersecurity—sadly—will be one of the hottest industries for the foreseeable future. We recommend scanning the Penn holding CIBR, the First Trust NASDAQ Cybersecurity ETF, for individual names to consider.
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MCFE
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Cybersecurity firm McAfee goes public—again
(22 Oct 2020) We are always on the lookout for a promising IPO, so when we heard that well-known cybersecurity firm McAfee (MCFE $19) was going public, it piqued our interest. We even like the firm's anything-but-dull founder, John McAfee (OK, despite the libertarian's recent arrest in Spain over tax evasion charges; it should be noted that McAfee has not been affiliated with the eponymous company since 1994). However, there was one major obstacle keeping us from investing in MCFE shares, which began trading on Thursday the 22nd: it was the company's second trip to the public equity markets—Intel acquired the firm and took it private in 2011. Despite having eighteen underwriters working on the deal, the IPO turned out to be a bust. After raising $740 million on Wednesday (the company sold 37 million Class A shares at $20 apiece), shares began trading at $18.60, got as high as $19.34, and then spent most of the session declining. A late-session rally brought them back up to $18.68 at the close. Our largest concern is the company's hefty debt load, which will still sit around $4 billion after some of it is paid off with the IPO proceeds. To put that in perspective, $21 billion cybersecurity firm Fortinet (FTNT $128), which we own in the Penn New Frontier Fund, has an aggregate short- and long-term debt load of just $2.7 billion. With so many hands in the pie and a share structure that would be hard for an SEC lawyer to decipher, we would steer clear of this warmed-over offering. |
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FTNT
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Penn New Frontier Fund member Fortinet jumps 21% in one session
(08 May 2020) For the past few years, we have been extremely bullish on the cybersecurity space. The chronic threat of cyber attacks from the likes of China, Russia, North Korea, and Iran, all working to inflict maximum pain on the US, is only going to grow moving forward. In the Penn Dynamic Growth Strategy, our ETF portfolio, we own CIBR, the First Trust NASDAQ Cybersecurity ETF; and in the Penn New Frontier Fund we own Fortinet (FTNT $69-$137-$122), a California-based cybersecurity vendor that sells detection and protection products to businesses of all sizes and a large number of government entities around the world. The company reported Q1 numbers this week that soundly beat expectations, and investors celebrated the news. Not only did the firm increase revenues by 22% y/y, net income rose by 76% from the same quarter last year—beating expectations by 120%. After the earnings release, FTNT shares proceeded to climb 21% in one session, finishing the week up 31% and easily punching through a 52-week high. Fortinet also happens to be one of the top ten holdings in CIBR. |
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China
EFX |
The US government charges four Chinese military members for the massive 2017 Equifax data breach. (10 Feb 2020) Back in the fall of 2017, we reported on the security breach at Equifax (EFX $106-$154-$157) that left around 150 million Americans' private data exposed. At the time, we didn't know who was directly behind the cyberattack, but we didn't have nice things to say about Equifax. As the hack was taking place, the company was busy lobbying congress to reduce its liability when consumers get hit in a security breach. We now have the missing piece of the puzzle, as Attorney General William Barr announced the indictment of four military officers (we assume officers, rank unknown) stationed in the People's Liberation Army 54th Research Institute. We figured it would ultimately come back to North Korea, China, or Iran, and we must assume that all three countries will continue trying to disrupt American commerce to the greatest possible degree. What was stolen in the 2017 hack? How about social security numbers, driver's license numbers, birthdays, and addresses. Essentially, everything needed to ruin someone's financial life. The CEO of Equifax, Richard Smith, was ultimately fired, but does anyone feel safer? Obviously, China will never extradite the Chinese officers—who were working under the direction of the Communist Party of China—to the US, nor will they probably even admit to the hack, but at least the truth is out. We completely supported the administration's tough negotiations with China over their unfair trade practices, and the phase 1 deal is a good first step. However, China will remain an adversary of the US until the communists are no longer in charge. That will be awhile. In the meantime, excellent job by the Justice Department in identifying the state-sponsored criminals. Everyone should be using a strong identity theft protection program—but we would advise against the one Equifax offers, for obvious reasons.
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CRWD
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CrowdStrike Holdings: The IPO we haven't talked about happens to be in a red-hot industry. (20 Jun 2019) When it comes to corporate and consumer protection, it is hard to imagine a growth industry hotter than cybersecurity. While all eyes were focused on exciting IPOs like Beyond Meat (BYND), Zoom (ZM), Fiverr (FVRR), and Chewy (CHWY), one with enormous potential may have been lost in the weeds: CrowdStrike Holdings (CRWD $56-$78-$79). This cybersecurity Software-as-a-Service (SaaS) company, founded in 2011, suddenly finds itself with a $15 billion market cap just one week after its initial listing. CrowdStrike offers a subscription service (Falcon) which protects IT platforms such as laptops, servers, virtual machines, and devices, in addition to personalized services such as incident response and data protection compliance. The company has already gained wide recognition and praise for the instrumental role it played in uncovering state-sanctioned hackers in China, North Korea, and Russia. Within 48 hours of the well-publicized Sony hack in 2014, for example, CrowdStrike had identified the nefarious player (North Korea) and outlined how the attack was carried out, step-by-step. Here's our major challenge with the company's stock (well, besides the lack of net income): it has a dual share class, which means that anointed investors will get ten votes per share while the rest of us will have just one. An inherently flawed—but perfectly legal—system. Thanks to investors' current fervor for IPOs, CRWD rocketed out of the starting gate. We wouldn't pick it up at its current price, and find better value in well-established cybersecurity names like FireEye (FEYE), Proofpoint (PFPT), or even the Prime Cyber Security ETF (HACK), which holds a basket of approximately 50 firms from the industry.
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Russia
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US, UK, Dutch authorities bust massive Russian hacking effort. In a joint effort to counter cybersecurity threats, officials from the United States, Brittain, and the Netherlands have busted Russian GRU (the country's military intelligence unit) officers in a massive, years-long hacking campaign. In one effort of the campaign, these agents tried to hack into the computers of the Organization for the Prohibition of Chemical Weapons. This followed the Kremlin's use of deadly nerve agents on targets in Britain. In another, agents attempted to gain entry into the servers of international antidoping organizations and the email accounts of officials at the agencies. Recall that Russia was banned from the 2018 Winter Olympics due to the use of illegal substances by athletes. Most disconcerting, US intelligence officials caught the Russians trying to hack into the servers of nuclear reactor design company Westinghouse Electric Corp. This involved setting up fake corporate domains, sending phishing emails to employees at the firm, and attempting the outright theft of employee credentials. On Thursday, the US Department of Justice indicted seven Russian intel officers for their role in the hacks.
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ChiComs
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Bloomberg investigation shows Chinese hacking of computer networks at highest levels. (04 Oct 2018) Despite denials by the likes of Apple (AAPL), and Super Micro (SMCI), Bloomberg has released an exclusive report providing evidence that the Chinese, via their People's Liberation Army, have "seeded" tiny microchip spy devices in thousands of server motherboards; computer equipment that was sold to at least 30 American companies, including Apple. The devices were implanted during the manufacturing process at Chinese facilities, and (according to the Bloomberg report) at Super Micro Computer (SMCI), a San Jose-based server manufacturer which employs primarily Asian workers. These devices, which Amazon (AMZN) first uncovered and reported on to US authorities, allow the attacker to create a "doorway" into any network on which the servers reside. Consider this: these are "viruses" which are impossible to remove, because they are part of the machine's hardware, not software. The networks in question run the most sensitive systems from a national security standpoint, operated by agencies such as the CIA, NASA, and the Department of Defense. This story should send shivers through the US intelligence community, and it should be the impetus needed to begin the search for other sources of manufacturers, outside of the reach of the Chinese military. This story also portends a long, ugly road ahead for US-Chinese trade negotiations. This is precisely the type of illegal intellectual property theft the Administration has railed against. Super Micro fell by 33% shortly after the Bloomberg article was released.
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SYMC
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Symantec loses one-third of its value immediately after announcing internal investigation
(11 May 2018) From an investment standpoint, it is interesting. From a torte reform standpoint, it is disgusting. Two things immediately happened after cybersecurity leader Symantec (SYMC $25-$20-$34) announced that it had opened an internal investigation based on "concerns raised by a former employee." First, the stock dropped by 33%, plunging through its 52-week low. Second, headlines came screaming through the SYMC newsfeed showing the names of law firms opening investigations into the matter. No matter what the company's internal investigation shows, something tells us that the "independent and fair-minded" law firms will all find pain and suffering caused. All we know thus far is that Symantec has voluntarily notified the SEC that its internal audit committee has launched the investigation, and that it probably won't file its annual report on time due to the matter. Whether the case surrounds a security breach (SYMC owns LifeLock) or something entirely different, we simply don't yet know. The company's lukewarm guidance for the fiscal year, issued after Thursday's close, didn't help matters. We purchased SYMC in the Intrepid Trading Platform at $20.09 and sold the shares at $32.50, for a 62% gain. Would we buy now? No. We need to hear the details of the case and survey the fallout. |
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SYMC
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Symantec gets a drubbing after earnings reality hits
(02 Nov 2017) About 45 days ago, after the big Equifax data breach hit the wires, we sold LifeLock parent Symantec (SYMC $23-$29-34) out of the Penn Global Leaders Club, taking advantage of the big run-up and cashing out with a 62% gain. Our timing was impeccable. SYMC fell nearly 9% on Thursday following a miss on profits for the quarter and a lowering of expectations for the full year. Revenues for the quarter ($1.276 billion) were actually up 26% from the same period last year, but human behavior got in the way following the breach, with investors rushing into the stock. In other words, the company was simply over-priced and is now falling back down to earth. |
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SYMC
EFX |
One bright spot from Equifax hack? Symantec’s LifeLock bounce
If so many Americans weren’t at risk thanks to the massive security breach at Equifax (EFX $111-$111-$147), it would be a nice case of schadenfreude. The company that holds so much sway over whether or not consumers can get approved for that new car, or a great mortgage rate on that new home, is now under the blinding-hot spotlight thanks to a security breach that compromised the personal data of nearly every adult American. We are talking about the company that extorts consumers, like a mobster walking his neighborhood shakedown beat at the turn of the last century, to pay a fee for the protection of their financial lives. What is even more sickening is that the company had just spent about half-a-million dollars to lobby Congress to lessen their responsibility to consumers in case of a security breach. Good thing Congress is so good at dragging its feet. Besides the emotional schadenfreude, something tangibly positive did come out of the hack for one particular company: Symantec’s (SYMC $23-$33-$33) LifeLock unit had a record number of Internet hits after the breach was made public. And talk about name recognition: more people are searching for the term “LifeLock” on Google than they are for “Identity theft.” That bodes well for the company we hold (it is up 60% since purchase) in the Penn Intrepid Trading Platform. Identity theft protection plans offered by the company cost between $10 and $30 per month, and the company is expected to add around 500,000 new subscribers in Q3 following the incident. Still, that would bring the unit’s total customer base up to just 5 million consumers, meaning their is plenty of room to grow. Despite the rosy outlook, we do place stop-losses on the stock in the Intrepid, either to lock in gains or limit losses. Clients and members can see where our current stop-loss is on Symantec by visiting the Trading Desk. Reprinted from this coming Sunday’s Penn Wealth Report |
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CUDA
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(11 Jul 2017) Barracuda Networks drops despite revenue beat. Shares of cybersecurity firm Barracuda Networks (CUDA) fell 5% on Tuesday despite a nice revenue beat and earnings in line with expectations. The cloud storage and security company saw their sales for the quarter increase 9%—to $94.2 million—from the same period last year, and earnings remained about the same at $2.7 million. That 3% profit margin may not sound too impressive, but compared to FireEye's (FEYE) -48% margin, it seems stellar. CUDA is trading around $23 per share. The company currently has 335,000 active subscribers.
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MSFT
FDX SYMC |
(15 May 2017) Massive cyber attack hits 200k computers in 150+ countries. The spread of a virus known as "WannaCry" has now claimed at least 200,000 computer victims in more than 150 countries, with Russia being hit the hardest. In the US, shipping giant FedEx (FDX $145-$195-$202) saw its computer system compromised; in Europe, the UK's National Health Service (NHS) also got pounded with the virus. The party responsible for the malware is demanding $300 be paid by Bitcoin for each system affected, or $600 if not paid within three days. So far, around $50,000 has been ponied-up by users around the world. The virus exploits a flaw in Windows XP—a quite outdated operating system, but still the third-most popular OS around the globe. Cybersecurity stocks like Penn holding Symantec (SYMC $16-$32-$33) were up in excess of 3% on Monday's session. SYMC is up 55% since it was added to the Intrepid last year.
(Photo: We didn't realize anyone was still using Windows XP) |