Make cyber crime pay: Cash in on the war against hackers and rogue states

Companies like Blancco, CrowdStrike, Darktrace, Arqit, KnowBe4, Palo Alto, Splunk, and Qinetiq may not be household names.

But they are just some of the listed players in the US and UK in cybersecurity, a $120bn (£99bn) global market whose technologies are of increasing importance to businesses, governments and households as people become a spend more of their lives online.

The expected growth in the sector suggests that cybersecurity can protect your portfolio in the long run.

The escalating threat from criminal ransomware groups, hackers and rogues to private and public sector services, IT systems and personal devices such as phones is such that the market could be worth $434bn (£358bn) by 2030.

“Criminal organizations and nations are trying to steal the secrets of individuals, companies and governments,” said Mike Seidenberg of the Allianz Technology Trust, which owns CrowdStrike and Palo Alto, among others. What did Russia do before it started the war in Ukraine?

“Launch a cyber attack on Ukraine’s communication systems. Cyber ​​security is the best territory in technology right now.’

The offensive at the start of the war in Ukraine and the damage to the Nord Stream gas pipelines point to further Russian action.

As Qinetiq boss Steve Wadey said, “World events continue to reinforce the vital importance of a technologically advanced defense industry to society.”

Cybersecurity involves the use of AI and other technologies to protect against cyber-attacks and what the industry calls “the unauthorized exploitation of systems, networks and technologies.”

However, you may have doubts about any kind of technology given Big Tech’s performance this year. Equities have plummeted on rising interest rates that are detracting from the appeal of the long-term returns offered by these groups.

But while companies are cutting back on all fronts, they’re less likely to cut back on cybersecurity given the magnitude of the problem. Many may increase spending, as cybercrime reportedly costs businesses as much as a trillion dollars a year.

A victim of the iSpoof phone and website cybercrime gang, which was shut down by Scotland Yard this week, lost £3 million. Charlotte Meyrick, manager of the Aviva Investors UK Listed Small and Mid-cap fund, comments: ‘The proliferation of threats and repercussions for companies in the event of non-compliance is more severe today than in the past.

‘As a result, a company’s cyber strategy is increasingly becoming a strategic business issue.’

The Accenture consultancy points out the risks of security breaches through supply chains. Such outings, CrowdStrike says, were up 431 percent last year.

Supply chains “provide an attack base” because a company, its customers and its suppliers may have linked systems for greater efficiency. The surge in demand for services may be why shares in the sector have fallen less than those of other technology groups this year.

The ISE Cyber-security index is down 28 percent since January, less than the decline of the tech-heavy Nasdaq 100 index.

The Aviva fund owns Blancco, which wipes data from discarded computers, and NCC, whose slogan reads, “Just because you don’t see the cyber threats and risks, doesn’t mean they aren’t there.” It also has an interest in defense specialist Qinetiq, a company that spun off from the Ministry of Defense in 2001.

Today, the main customers are the US, Australian and British governments. An analyst consensus rates shares in Blancco, NCC and Qinetiq as a buy.

America may dominate the industry, but Britain is a major force, continuing the legacy of Bletchley Park and its wartime codebreakers. At the moment, Darktrace is perhaps the most controversial option in the UK, following US private equity fund Thoma Bravo’s decision in September to walk away from a bid for it.

Mystery also surrounds the intentions of Mike Lynch, the founder of Darktrace and co-owner of a 12 percent stake with his wife. Lynch faces extradition to the US over Hewlett Packard’s takeover of his Autonomy business.

Despite this, brokers Jefferies and Numis rate it a “buy,” reflecting excitement over CEO Poppy Gustafsson’s ambitions to make Darktrace an example of world-class British innovation.

Organizations are calling for the Prevent system. Exactly how Prevent simulates a ransomware hacker’s malicious thought processes, the vast majority of us will never know. Like the other ever-evolving technologies deployed by all cybersecurity companies, this system is complex and shrouded in secrecy.

When investing, it can be tempting to avoid companies you don’t understand. I resist that urge. I want to take advantage of the rising spending on their products and be part of the fight.