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BRAZIL - 2019/07/17: In this photo illustration the Fortinet logo is seen displayed on a smartphone. ... [+] (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)

Our theme of Cyber Security Stocks is up by about 25% year-to-date, meaningfully outperforming the S&P 500 which was up by about 16% over the same period. There has been a renewed interest in cybersecurity stocks, due to several high-profile cyber attacks in recent months, including the ransomware attacks on the Colonial pipeline and software company Kaseya, and the massive data breach at wireless behemoth T-Mobile. Moreover, with businesses increasingly moving online following the pandemic, there is a looming incentive for cybercriminals. For example, per the SonicWall Cyber Threat Report, there has been a 62% increase in ransomware attacks globally since 2019, and a 158% jump in North America. This could make companies and governments more serious about protecting their networks and digital infrastructure, translating into higher demand for cybersecurity tools and services in the years to come.

Within our theme, Fortinet, a company that provides cybersecurity-related hardware such as firewalls and software, has been the strongest performer, rising by about 101% year-to-date on account of stronger than expected quarterly results and its ongoing pivot to the cloud. On the other side, Okta stock (NASDAQ: OKTA) has been the weakest performer, with its stock price down by about 11% year-to-date.

[8/6/2021] Why Cyber Security Stocks Have Rallied Over The Last Month

Our theme of Cyber Security Stocks has gained a solid 6% over the last month and remains up by about 22% year-to-date. In comparison, the broader Nasdaq-100 NDAQ has returned about 18% over the same period. The recent outperformance comes on the back of a renewed interest in the cybersecurity space following several high-profile cyberattacks, including the recent attack on software company Kaseya and the ransomware attack on the Colonial Pipeline in May. This could make companies and governments more serious about protecting their networks and digital infrastructure, translating into higher demand for the companies in our theme in the years to come. Moreover, going by the performance of the few companies that have already reported results, investors are expecting strong numbers from cybersecurity players this earnings season.

Within our theme, Fortinet, a company that provides cybersecurity-related hardware such as firewalls and software, has been the strongest performer, rising by about 102% year-to-date on account of stronger than expected quarterly results and its ongoing pivot to the cloud. On the other side, the stock price for Qualys, a company that provides cloud security, compliance, and related services, remains down by about 14% this year, as its guidance for this fiscal year was weaker than expected. Other stocks in our theme include CrowdStrike CRWD , which is up 25% year-to-date, and Zscaler ZS which is up around 24%.

[6/8/2021] Cyber Security Stocks To Watch After Colonial Pipeline And JBS Hacks

Our theme of Cyber Security Stocks remains down by about 1% year-to-date, significantly underperforming the S&P 500 which has gained about 13% over the same period. However, the theme has picked up a bit since our last update in mid-May, when it was down by 6%. The underperformance versus the broader indices is likely due to the fact that most of the stocks in the theme are high-growth, high-multiple names that have been out of favor in the current market, as investors rotate into value and cyclical stocks to play the post-Covid boom in the U.S. economy. However, theres good reason for investors with a long-term view to increase their exposure to cybersecurity stocks. Companies and governments are getting more serious about protecting their networks and infrastructure, following multiple high-profile cybersecurity incidents in recent months, including the ransomware attack on the Colonial Pipeline, the SolarWinds SWI hack, and the recent cyber attack on JBS - the worlds largest meat supplier. The increasing shift from on-premise to cloud-based information systems should also make companies prioritize security. Moreover, IT spending by corporates, in general, is likely to pick up from this year, after they scaled back on spending in 2020 due to Covid-19. This should bode well for companies that provide software, hardware, and services that help protect computer systems and networks.

Within our theme, Fortinet FTNT a company that provides cybersecurity-related hardware and software, has been the strongest performer, rising by about 49% year-to-date on account of stronger than expected quarterly results and its pivot to the cloud. On the other side, the stock price for Qualys QLYS a company that provides cloud security, compliance, and related services, remains down by about 18% this year, as its guidance for this fiscal year was weaker than expected.

[5/17/2021]

Our theme of Cyber Security Stocks has declined by about -6% year-to-date, significantly underperforming the S&P 500 which has gained about 11% over the same period. However, the sector is likely to come back into focus for a couple of reasons. Firstly, there was a major cyber attack on the computer systems of the Colonial Pipeline forcing a shutdown of a pipeline that controls roughly half the gasoline, jet fuel, and diesel flowing along the U.S. East Coast. This marks the second major attack on core U.S. infrastructure in six months, coming on the heels of the Solar Winds hack which was reported last December. Secondly, last week, President Joe Biden signed an executive order aimed at bolstering the federal governments cybersecurity defenses, with a host of plans to implement stronger cybersecurity standards. The recent events are likely to cause companies and the U.S. government re-assess threats and potentially increase cybersecurity-related budgets. This should bode well for companies that provide software, hardware, and services that help protect computer systems and networks.

Within our theme, Fortinet, a company that provides cybersecurity-related hardware and software, has been the strongest performer, rising by about 37% year-to-date driven by stronger than expected earnings in recent quarters. On the other side, the stock price for Qualys a company that provides cloud security, compliance, and related services, remains down by about 18% this year, as its outlook for this fiscal year was lighter than analysts expected.

[4/14/2021] Hows Our Cybersecurity Theme Faring?

Our indicative portfolio of Cyber Security Stocks has declined by about -1% year-to-date, underperforming the S&P 500 which has gained about 10% over the same period. However, the theme remains up by over 130% since the end of 2019, significantly outperforming the broader markets. The recent sell-off comes as investors book profits on remote working and SaaS stocks that rallied big through the pandemic. However, this could present a good opportunity for investors to enter the cybersecurity space. Global IT spending is expected to pick up this year after a muted 2020, rising by about 8.4% to $4.1 trillion per Gartner IT . Cybersecurity is likely to be a major focus area for most companies given the increasing shift to distributed workplaces and cloud-based applications and some high-profile security breaches in recent months. Within our theme, Fortinet, a company that provides cybersecurity-related hardware and software, has been the strongest performer, rising by about 34% year-to-date driven by stronger than expected earnings. On the other side, Mimecast Limited, a company that develops cloud security and risk management services for email and corporate data, was the weakest performer declining -28% so far this year, as some of its products were impacted by a security breach in January.

[3/11/2021] Time To Buy Cybersecurity Stocks?

Our indicative portfolio of Cyber Security Stocks has declined by about 8% year-to-date, driven by the broader sell-off in technology and high growth stocks. The theme has also underperformed the Nasdaq-100, which is down by about 4% over the same period. However, we think this could be a good time to enter these stocks. Governments and corporations are likely to prioritize digital security spending following some recent high-profile cyber attacks. In December, there was a sizable data breach on U.S. Federal government computer systems, tied to network management software vendor SolarWinds. More recently, Verkada, a company that provides cloud-based security camera services to a host of institutions and companies including Tesla TSLA , was hacked. Within our theme, Fortinet, a company that provides cybersecurity-related hardware and software, has been the strongest performer, rising by about 21% year-to-date. On the other side, Mimecast Limited, a company that develops cloud security and risk management services for email and corporate data, was the weakest performer declining 25% so far this year.

[2/22/2021] Cybersecurity Stocks To Watch After SolarWinds Attack

Our indicative theme of Cybersecurity Stocks has returned over 150% since the end of 2019, compared to gains of about 21% on the S&P 500 over the same period. The theme is up by about 5% year-to-date. Cybersecurity companies typically provide software, hardware, and services that help protect computer systems and networks from data theft and potential disruption of services. The sector saw renewed interest late last year, following news of a large cyber-attack on IT infrastructure and network management software vendor SolarWinds, causing increasing concerns that software tools used daily by organizations and governments could be vulnerable. More broadly, following Covid-19, economic activity is increasingly moving online with businesses also becoming more distributed on account of the work from home trend. This should cause companies to prioritize their cybersecurity spending. Within our theme, Zscaler and CrowdStrike have been the strongest performers, with their stock prices rising by almost 5x each since the end of 2019. On the other hand, Qualys has underperformed, declining by about 16% over the same period.

See our Cybersecurity Stocks theme for a complete list of the companies in our theme and a look at their recent performance.

[5/22/2020] Cybersecurity Stocks

Cybersecurity stocks have rallied sharply this year, with our indicative theme of six cybersecurity stocks that include Palo Alto Networks PANW (NYSE: PANW), Zscaler (NASDAQ: ZS), and others up by about 28% year-to-date, on an equally weighted basis. While cybersecurity is a relatively diverse and complex sector, we believe there could be two broad trends driving the surge. Firstly, with the spread of the Coronavirus pandemic, more people have been working from home, and this has required companies to better secure corporate IT infrastructure, driving up demand for cybersecurity tools. Secondly, most of these companies offer their services on a subscription basis, with recurring revenue streams that could make them a stable bet during times of uncertainty. Its also very likely that the crisis will cause a structural shift in the way businesses operate, benefiting these stocks well past the pandemic. Our theme of Cyber Security Stocks outlines some of the key names in the cybersecurity space and how they have performed in recent years. A part of the analysis is summarized below.

Zscaler ($10 billion market cap, $303 million FY19 revenue), offers two tools, namely Zscaler Private Access which provides secure access to internally managed applications, that are hosted internally in data centers or in private or public clouds, and Zscaler Internet Access, which enables users to connect to externally managed applications such as Microsofts MSFT Office 365 and Salesforce. The stock has surged by 60% this year, as an increasingly distributed workforce drives demand for the companys secure access solutions.

Palo Alto Networks ($23 billion market cap, $2.9 billion revenue) is a cybersecurity company best known for its firewalls, which are network security devices that scan for malicious traffic. The company has been increasingly focusing on cloud-based software-as-a-service (SaaS) security tools. While the stock is down slightly year-to-date, partly due to slowing revenue growth, the company could be a good long-term bet as businesses increasingly move online.

CrowdStrike ($17 billion, $481 million revenue) offers a cloud-delivered endpoint protection platform, which relies on lightweight software running on the customers servers or laptops. These applications, in turn, send data to a cloud-based security system that analyses threats. The stock is up by over 60% year-to-date, as the coronavirus pandemic has expanded the companys addressable market meaningfully.

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Fortinet, Okta: With Cyberattacks on The Rise, Pick These Stocks - Forbes

In the past few months, nothing has reminded everyone of the etymology of the expression computer virus like ransomware. This form of malicious code is delivered through a vulnerability in the victims system, such as a phishing email or password spraying, infiltrating and potentially crippling it like a disease. Specifically, ransomware is used to encrypt user data and either delete or release that data unless a demand (commonly for money) is met. Ipso facto, ransomware causesby definitionadverse consequences for its intended and unintended targets. Even when the ransom is paid or the attackers demand is eventually met, frequently a portion of the encrypted data will have been lost anyway and the victim may be forced to stay offline for a while, incurring significant costs to repair or change its systems. Where the victim serves others, for example, providing public goods like healthcare, education, or utilities, the adverse consequences can quickly, and foreseeably, spread beyond the ransomwares initial targets. In other cases, the means by which ransomware is delivered especially when delivered through or as part of a digital supply chain attack can produce a range of cascade effects harming entities who were not the real target of the operation but nonetheless suffer its consequences.

Recent months saw asignificant surgein ransomware operations. For instance, in May 2021, Colonial Pipeline, a United States oil pipeline system carrying gasoline and jet fuel, was forced to halt its operations to ensure system safety following aransomware attack. As a result, there was panic buying and shortage of gasoline which led to the highest average gasoline prices in the US for seven years. The attack on the meat provider JBS has been connected to a rise in the price of beef and pork. In the United Kingdom,ransomware attackshave targeted the education sector with increasing frequency, leading to the loss of student coursework, school financial records and data relating to COVID-19 testing. The internal network of Brazils National Treasury was hit by ransomware in August 2021, and September saw a ransomware operation against South Africas Justice Department. It is no wonder that using an expression that has sadly become all too common we are witnessing a ransomware epidemic. The cost of this epidemic, both financially and otherwise, may be very high. According to recent reports, India saw a significant increase in the financial impact of ransomware operations: the approximate recovery cost from the impact of ransomware tripled in the last year, up from $1.1 million in 2020, to $3.38 million in 2021.

The ever-growing number of attacks and increased professionalization of actors behind ransomware operations call for robust action by states to meaningfully protect cyber infrastructure under their jurisdiction and control. Countering ransomware is not just a matter of national security and good governance. It is an obligation under international law, one highlighted in the latest, and fifth, Oxford Statement on the Protections of International Law in Cyberspace. Like previous iterations of the Oxford Process, the Fifth Statement aims to reflect existing principles and rules of international law in their application to cyber operations and to call upon all states and other international actors to abide by them. Previous Oxford Statements on international law protections in cyberspace have focused on the rules of international law when viewed from the perspective of objects or processes which deserve protection, e.g. the rules which apply to cyber operations that target the health sector, vaccine research, electoral processes. However, as with our Fourth Statement, which sets out rules relating to information operations and activities, the present Statement focuses on a specific type or method of cyber operation.

While it may appear obvious that states must not themselves engage in ransomware, calling into play a set of negative obligations under international law, this is just the starting point. Ransomware is a problem not only when state-directed or state-sponsored, but even when carried out by non-state actors and tolerated or acquiesced in by different states, including the one from which it originates. For this reason, all states have an obligation to give effect to the well-established rules of international law requiring them to adopt protective measures against the harm caused by ransomware operations which are carried out by others. Those impose obligations not only to take feasible measures to put an end to harm caused to the rights of other states but also to take measures to prevent the infringement of the human rights of persons within the state in question. Duties to protect against ransomware may be complied with in several ways, ranging from the investigation and punishment of those responsible for ransomware and the training of specialized cybersecurity personnel, to the adoption of technical measures to strengthen cyber infrastructure, international cooperation and information-sharing. We very much hope that the adoption of these and other measures against ransomware will constitute an effective remedy, if not a cure against the particularly pernicious form of cyber operation that ransomware embodies.

Our survey of existing international law whose results are enshrined in the Statement reproduced below reveals that there is no space for ransomware in a healthy, peaceful, and prosperous international community. All states are called upon to fully commit to this vision.

The Fifth Statement and its current signatories are reproduced below. As with other Statements, we seek the broadest possible support within the profession from across the globe. International lawyers who wish to append their name to the statement are invited to express their interest via email tooxfordcyberstatement {at} gmail(.)com.

The Oxford Process is convened under the auspices of the Oxford Institute for Ethics, Law and Armed Conflict whose work on international law in cyberspace is supported by funding from Microsoft and the Government of Japan.

THE OXFORD STATEMENT ON INTERNATIONAL LAW PROTECTIONS IN CYBERSPACE: THE REGULATION OF RANSOMWARE OPERATIONS

Reiterating the commitment expressed in the First, Second, Third and Fourth Oxford Statements to clarify rules of international law applicable in the use of information and communications technologies;

Noting that ransomware (i.e. malware designed to encrypt data and render it unavailable unless a demand is met) is a global threat, having been employed at an escalating pace by a growing number of malicious actors, including states and non-state groups for financial or political purposes, often connected to criminal and other unlawful activities such as terrorism, human and drug trafficking, money laundering, sanctions evasion, and the proliferation of weapons of mass destruction;

Stressing that the COVID-19 pandemic and our increased dependency on the Internet and other information and communications technologies have enhanced vulnerabilities to and opportunities for ransomware and other types of malware that facilitate its distribution, including the targeting of remote control or monitoring systems and the use of phishing emails, malicious websites or false notifications;

Considering that ransomware has, in the vast majority of cases where it has been employed, caused significant and widespread harm to public and private institutions, as well as individuals, such as financial loss, reputational damage, breach of confidentiality, and the significant disruption of critical infrastructure, including healthcare and education, while posing an imminent risk of destructive harm to industrial control systems such as electric grids, water distribution systems and nuclear power plants;

Bearing in mind that ransomware can take increasingly varied and sophisticated forms, including targeted and indiscriminate operations, and lead to the denial of access to and/or the unauthorized release of data if demands are not met;

We agree that:

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Oxford Statement on International Law Protections in Cyberspace: The Regulation of Ransomware Operations - Just Security

Russia accounted for more than half of all cyberattacks observed by Microsoft over the past year, the company said.

The software giant released its annual Digital Defence Report on Thursday, which covers the period between July 2020 to June 2021.

The main highlight of the study is that attacks from Russian state actors account for 58 per cent of all cyber intrusions.

The success rate of hackers in the country saw a rise from 21 per cent last year to 32 per cent in 2021.

The top three countries targeted by these attacks were the United States, Ukraine and the United Kingdom.

Their main targets were government agencies for intelligence gathering, the study shows, jumping from 3 per cent of attacks in 2020 to 53 per cent in 2021.

Hackers are mainly focusing on agencies involved in foreign policy, national security or defence, such as US-based network-monitoring software company Solar Winds.

The report is a 134 pages-long compilation of data and insights collected and observed by Microsoft.

Its main purpose is to help businesses, organisations and governments around the globe better understand the cyberworld and protect themselves in the wide cybersecurity landscape.

During the pandemic, Microsoft has noticed a surge in cyberattacks and explains it as an increased reliance on telecommunications, giving malicious actors new vectors to gain access to targeted private networks that were scrambling to support new ways of doing business.

When a customer, being an organisation or an individual account holder, is targeted by state-sanctioned activities that Microsoft tracks, it delivers a nation-state notification (NSN).

Over the past three years, it has delivered over 20,5000 NSNs.

These cyberattacks were made by state actors who work for a government to disrupt or compromise targets and breach their security to access valuable data. In other words, they have a license to hack.

The victims of attacks often have information relevant to an adversary governments intelligence needs, which is why so many government agencies and think tanks are attacked, the report highlighted.

However, private industrys role in supporting remote workers, increased healthcare services, COVID-19 vaccine research, and COVID-19 vaccine distribution have also made them more common targets for these sophisticated actors seeking information for their governments national security or intelligence purposes.

Russia is not the only country on Microsofts radar, according to the report. The highest volume of attacks recorded originated from North Korea, Iran and China.

For the first time, South Korea and Turkey made an entry in Microsofts annual report.

Most sectors attacked showed that nearly 80 per cent of those targeted were either in government, NGOs or think tanks.

Microsoft has witnessed a surge in cybercrimes, in particular in ransomware attacks, which were already an issue flagged in the 2020 survey.

Cybercriminals are targeting and attacking all sectors of critical infrastructure, including healthcare and public health, information technology (IT), financial services, and energy sectors, this years report said.

For example, identity and password as well as phishing attacks, are on the rise.

Why would an attacker break in when they can log in? the report asks. More than 15,000 phishing sites were neutralised within three months, according to Microsoft.

The survey also looked at distributed denial of service (DDoS) attacks. These types of attacks hamper or completely prevent users from accessing websites by sending multiple requests at the same time so as to overload them and making the users navigation extremely slow.

The Internet of Things (IoT) also appears to be one of the biggest targets, with the multiplication of connected devices. With such multiplication, Microsoft points out a certain lack of rigour in terms of security, as 20 million devices were found to use the default password admin in just 45 days of signals.

How can the user prevent such breaches? At the end of the report, Microsoft offers some general guidelines, gathered under the cybersecurity bell curve, a reminder of basic security hygiene.

If correctly applied, these habits can protect against 98 per cent of attacks, the web giant assures.

As we increasingly do more of our work online, so do criminals and nation state attackers.

Doing basics well, such as enabling multifactor authentication, applying least privilege access, using antimalware or keeping versions up to date, is often the best way to disrupt and prevent their attacks.

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More than half of state-backed cyberattacks have come from Russia, according to Microsoft - Euronews