Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market Intermediate Trend Intact - 25th Jan 21
Precious Metals Could Decline Before their Next Attempt to Rally - 25th Jan 21
Great Ways of Choosing Good CMMS Software for a Business - 25th Jan 21
The Dark Forces behind American Insurrectionists - 25th Jan 21
Economic Stimulus Doesn’t Always Stimulate – Pushing On A String - 25th Jan 21
Can Karcher K7 Pressure Washer Clean a Weed Infested Driveway? Extreme Power Test - 25th Jan 21
Lockdown Sea Shanty Craze - "Drunken Sailor" on the Pirate Falls Crazy Boat Ride - 25th Jan 21
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

A "Stealth" Play on Cybersecurity with this National Security Investment

Companies / Cyber War Sep 10, 2015 - 10:06 AM GMT

By: ...

Companies

MoneyMorning.com Michael A. Robinson writes: In fiscal year 2015, the federal budget is $3.8 trillion.

When you look at a number like that, a $133 million award sounds insignificant.

But the focus of that spending – on advanced cybersecurity – that very meaningful to tech investors like you.


On Sept. 1, Uncle Sam issued this “identity theft insurance” contract to privately held ID Experts. It did so to protect the 21.5 million Americans whose personal information was stolen as part of a 2014-’15 cyber-theft at the U.S. Office of Personnel Management.

It’s all part of a massive push – $14 billion in fiscal 2016 alone – by the nation’s leaders to thwart cyber intrusions at federal agencies and other critical places like banks and brokerages.

Of course, not all of these contracts are going to privately held firms or small and risky cybersecurity specialists.

Today I want to show you how to profit from a defense tech leader that recently opened up a new line in federal cybersecurity – a business that’ll be growing at a hefty, steady pace between now and at least 2020.

Most investors don’t even realize it’s a huge player here…

Billions and Billions

Cybersecurity will remain a growth field for years to come. Just look at the headlines.

Hardly a day goes by without a cyberattack on a government agency, corporation, bank, retailer or university.

According to a report from Market Research Media, the federal government will spend $65.5 billion on cybersecurity between 2015 and 2020. And the pace of that spending will grow steadily at about a 6.2% compound annual growth rate (CAGR).

Take the hack of the UCLA Health System. In mid-July, hackers exposed the health care data of roughly 4.5 million patients.

On March 14, the U.S. State Department said Russian hackers breached its computer network and the agency had to shut it down to remove malicious software. Two weeks later, the state of Indiana had its website hacked and taken down.

That’s minor compared with the Feb. 5 news that as many as 80 million customers of Anthem Inc. (NYSE: ANTM), the nation’s second-largest health insurance company, may have had their account information stolen. That Anthem data includes employment and income histories, addresses and Social Security numbers.

A 2014 survey by the Ponemon Institute showed that the average cost of cybercrime for U.S. retailers more than doubled from the year before to an annual average of $8.6 million per company.

Hacks on other sectors proved even more expensive, the Ponemon survey showed. The annual average cost per cyberattack came in at $20.8 million in financial services, $14.5 million in the technology sector and $12.7 million in communications industry.

No wonder the researchers at MarketsandMarkets say cybersecurity is a global $60 billion industry. The forecasters there expect that number to double just in the next four years alone.

Given the sensitive nature of the data it holds on its computers, the U.S. government spends heavily on cybersecurity. The fiscal 2016 budget that begins Oct. 1 includes $14 billion in spending.

Roughly $5.5 billion of that will protect the Pentagon’s computers alone.

A Truly Unstoppable Trend

In the words, cybersecurity clearly meets the mandates of Rule No. 3 of my five-part system for building wealth with tech – “Ride the unstoppable trends.”

That’s why I think tech investors should look at Raytheon Co. (NYSE: RTN).

The Waltham, Mass.-based company is well known as one of the nation’s top defense contractors. But over the last few years, Raytheon has quietly beefed up its cyber division to protect government agencies and other large organizations.

In that regard, Raytheon ranks as a “stealth” cyber play.

This is a natural business line for the nation’s fourth-largest defense contractor. Every agency within the Pentagon needs cyber safeguards, and the equipment Raytheon sells, such as radar and missile-control systems, must have such cyber defenses built in.

Raytheon made a huge leap forward in April when it bought control Websense Inc. for $1.7 billion, creating Raytheon/Websense, a new cybersecurity unit focused on commercial clients such as banks and retailers.

The move instantly diversified the company’s cyber operations beyond the federal realm. Websense counts some 21,000 commercial clients, about half of whom are overseas, and it consistently ranks in the top 10 firms providing “gateways” to protect against Web intrusions and data loss protection.

Plus, Raytheon isn’t going it alone. Vista Partners LLC, the company that owned Websense, retains a 20% interest in the new unit.

Under the deal, Raytheon is investing $965 million in cash, providing a $600 million loan and contributing $400 million of existing cyber assets. In turn, it expects the cyber business to bring in $500 million in sales in its first year of operations, with 20% profit margins.

When Going Private Makes Sense

Industry analysts say other large defense firms have struggled to sell their cybersecurity wares outside normal Pentagon channels. So, Raytheon’s forming a unit focused solely on business clients strikes me as a savvy move.

More to the point, it’s part of Raytheon’s long-term strategic plan. Company leaders decided back in 2007 to invest in cybersecurity as a growth business and have made some 14 acquisitions in this area since then.

For instance, Raytheon acquired surveillance and cybersecurity
company Blackbird Technologies for $420 million in November 2014. Blackbird counts customers at the Department of Defense and in the intelligence community.

Much of Honeywell’s civilian cybersecurity operations will be housed in the company’s Intelligence, Information and Services division. In this year’s second quarter, the unit accounted for roughly 25% of Raytheon’s $5.8 billion in sales, up 3% from the year-ago period.

Plus, Raytheon ranks as a “twofer” investment. We get both its new cybersecurity business and the company’s full defense capabilities.

And those are wide ranging. Raytheon ranks as a leader in missile defense, radar, surveillance, electronic warfare and precision weapons. It also provides advanced sensors, avionics, data analytics and drones.

The stock trades at $107.48, giving it a nearly $32.49 billion market cap. It has 13% operating margins and a 19% return on equity.

And the stock has built-in upside. It trades at less than 15 times forward earnings, a roughly 15% discount from the Standard & Poor’s 500 Index.

Over the past three months, the stock is up nearly 7.1%, compared with the S&P’s 5.1% decline. Not counting Raytheon’s 2.8% dividend, the stock has a two-year return of roughly 38%, more than double the broader market’s 18% return.

In other words, Raytheon joins Ultimate Software Group Inc.(Nasdaq: ULTI) and the three companies I shared with you on Friday as “comeback” plays – the investments we’ll use to “whipsaw” this correction right back in your favor.

Raytheon will help protect the value of your portfolio at the same time it’s protecting our nation’s cybersecurity – and, increasingly, our banks and retailers as well.

[Editor’s Note: Later today, Michael is “live-tweeting” one of the biggest tech events of the year – Apple Inc.’s new product announcements, at 1 p.m. Eastern. He’ll be bringing you all of the new iPhones and other gadgets, prices, and more in real-time – along with his own thoughts and insights. To listen in, just “follow” Michael’s Twitter. And you can join the conversation yourself by following or tweeting the hashtags #MRAppleEvent and #AppleEvent.]

Source http://strategictechinvestor.com/2015/09/get-in-on-the-ground-floor-of-this-national-security-investment/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules