Check Point and the Panama Papers

04/20/2016 7:00 am EST


Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

The impact of the "Panama Papers" is far reaching; I expect the massive data breach will have a meaningful impact on cybersecurity services, suggests Ian Wyatt, editor of Top Stock Insights.

We could be looking at the biggest catalyst for cybersecurity stocks in years. Yet despite these recent developments, the stocks in this sector have barely budged.

I see this as an opportunity, particularly for Check Point Software Technologies (CHKP), which we added to our portfolio in November.

At that time, we chose Check Point for its cheap valuation relative to peers, its history of earnings and revenue growth, plus the vast resources at its disposal.

The firm's cash war chest gives it the ability to acquire companies and technologies outright if the opportunity is right.

It also means that the company has cash available for rapid deployment in high-priority areas, while smaller and not-yet-profitable competitors are burdened by a lack of resources.

Law firms and other similar client services companies simply have too much at stake to avoid taking decisive action. And these firms will almost certainly turn to industry leaders.

As a result, I see strong and sustained tailwinds on the horizon for cybersecurity companies. What’s more, I don’t see this material industry change reflected in today’s stock prices…at least for Check Point.

Check Point has a lot going for it. From a technical perspective, the stock experienced a bullish cross of its 200-day and 50-day moving averages at the start of April, just before the Panama Papers hit the headlines.

With bullish technical signals and a material change to the business-to-business cybersecurity landscape, Check Point looks poised to break out in the coming weeks.

I feel confident that we’ve made a great choice in Check Point. With analyst upgrades and new investments by institutional buyers making headlines, it seems the sentiment is beginning to turn around for this stock.

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By Ian Wyatt, editor of Top Stock Insights

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