Back in August, I questioned whether the Darktrace (LSE: DARK) share price was a ticking time bomb. Despite concluding that it probably wasn’t, I did suggest that it might let off some steam at some point. 

In retrospect, it turns out that the former may have actually have been appropriate. The cybersecurity firm’s value has tumbled 30% in the last month alone.

Is it time for me to scratch that contrarian itch (as others seem to be doing today) or could there be more bad news to come? Let’s begin with a quick recap.

The Darktrace share price: what gives?

It was all going so well. Priced 250p a pop at its IPO, Darktrace stock went as high as 1,003p per share earlier this year. Towards the end of October, however, it all began to unravel.

The first capitulation occurred when analysts at Peel Hunt questioned whether the company was really worth its multi-billion pound valuation. Citing growing competition and Darktrace’s low R&D spend, their target price was just 473p. 

The downward pressure then continued as the post-IPO lock-up period came to an end and original investors jettisoned their holdings. Board members were also active sellers. Records show non-executive director Vanessa Colomar pocketed over £8m in November. That’s hardly encouraging.

From hitting that 52-week high, the Darktrace share price has now fallen 60%. So, where does it go from here?

Where next?

As always, no one knows for sure. So, let’s focus on a few positives first.

There’s little point arguing against the idea that cybersecurity will remain a major investment theme going forward. Assuming nothing truly awful happens, it seems likely that Darktrace’s self-learning AI will likely mop up a decent proportion of this business from multiple industries looking to protect themselves from bad actors operating online.

Regardless of share price antics, it’s also clear the firm is growing well. October’s Q1 trading update revealed a 50.8% increase in revenue (to $93.1m) compared to the previous year. FY22 growth of between 37% and 39% is now expected. Broker Berenberg remains a fan too, recently stating that “any share price capitulation is a result of fear not fact“.

On the flip side, one can argue that the valuation is still too high at a price-to-sales ratio of 13. While seemingly unrelated, the rise of Omicron could also push investors to sell what they can and batten down the hatches. Even if the general market sell-off doesn’t continue, Darktrace should be demoted from the FTSE 100 on December 20. 

The situation isn’t helped by the Cambridge-based business having a very small free float (the number of shares available to buy and sell on the market). This could make any falls all the more dramatic because it takes less to budge the needle. Of course, big moves in the opposite direction can also occur, as evidenced by today’s 6% rise.

Better opportunities

Darktrace is in something of a dark place right now. While more positive on this company compared to fellow 2021 IPO stock Deliveroo, I can’t help but think that its similarly unprofitable status could haunt it going into 2022, especially in a market where traders are already nervous about the pandemic and the threat of rising interest rates. 

In looking for compelling growth plays, the £2.6bn cap doesn’t make my shortlist just yet. 

The post The Darktrace share price is down 30% in one month! Where’s it going in 2022? appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Deliveroo Holdings Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In hindsight, that was the right move. Since that article, Darktrace’s share price has fallen from 864p to 590p, meaning that I’ve avoided quite a significant loss.

So why have DARK shares fallen? And is now a good time to buy the stock for my growth portfolio?

Why Darktrace’s share price just crashed

There are two main reasons Darktrace’s share price has plummeted recently. The first is that late last month, Peel Hunt posted a bearish research note on the company. Published on 25 October, its analysts gave Darktrace shares a ‘sell’ rating with a price target of 473p. They cited a disconnect between the valuation and the ultimate revenue opportunity as the reason behind their bearish call.

The second reason the share price has tanked recently is that early investors have been offloading stock. Earlier this week, Vitruvian Partners – the company’s fifth largest shareholder – dumped 11m shares at a price of 580p, raising proceeds of £64m. This move came after the company’s post Initial Public Offering (IPO) 180-day lock-up period ended.

Russ Mould, Investment Director at AJ Bell, said that Vitruvian’s move could spark other Darktrace investors to follow suit. If that happens, it could put further pressure on the share price.

Should I buy Darktrace shares now?

Should I take advantage of this share price weakness and snap up Darktrace stock for my portfolio while it’s under 600p?

Well, the valuation certainly looks far more reasonable now, to my mind. For the year ending 30 June 2022, analysts expect Darktrace to generate sales of $387m. That means the forward-looking price-to-sales ratio is now around 15. That’s still not low. But it’s not outrageous for a high-growth company like Darktrace, which is forecast to generate revenue growth of nearly 40% this year. I’d be comfortable paying that valuation if I was very bullish on the company.

One concern I have here however, is that profitability could still be years away. This financial year, Darktrace is expected to generate a net loss of $25m. Next financial year, analysts forecast a net loss of $17m. Unprofitable companies tend to be higher-risk investments. That’s because it’s much harder to accurately value them. Given the lack of profits, I’m hesitant to buy the stock now.

Another concern is that founder Mike Lynch – who currently owns 16% of the company – may be tempted to sell stock in the near term. Lynch is currently facing extradition to the US on fraud charges. Given that he’s facing a potentially lengthy legal battle, he may choose to cash in on his post-IPO gains now. This could hit the share price in the near term.

Weighing everything up, I’m happy to leave Darktrace shares on my watchlist for now. All things considered, I think there are better cybersecurity stocks I could buy for my portfolio.

The post Darktrace’s share price just fell below 600p. Should I buy the stock now? appeared first on The Motley Fool UK.

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Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I’m quite bullish on the prospects for the cybersecurity sector as a whole. Going forward, cybercrime is only going to become more of a problem and businesses and governments are going to spend billions fighting it. Should I buy Darktrace shares for my portfolio then? Let’s take a look.

Should I buy Darktrace shares?

The first thing I want to know about Darktrace is whether the company has a genuine competitive advantage. There are plenty of great cybersecurity companies I could invest in today (Crowdstrike, ZScaler, etc). Is Darktrace an industry leader?

Looking at reviews of Darktrace’s cybersecurity solutions, I’m not 100% certain it’s a genuine industry leader. Gartner, for example, gives Darktrace a score of 4.4/5 while it gives Crowdstrike 4.9/5. Meanwhile, on software review site TrustRadius, Darktrace has a score of 8.7/10 while Crowdstrike has a score of 9.1/10.

I know this is a simplistic way of assessing competitive advantage but I think it’s helpful. These reviews indicate that there could potentially be better cybersecurity stocks to buy if I’m looking to invest in the best companies.

Strong growth

Turning to the financials, I’m impressed by Darktrace’s growth. Recent full-year results for the year ended 30 June showed revenue growth of 41.3%. Adjusted EBITDA for the period was up 233% to $29.7m.

There were plenty of other positives in the full-year results too. For example, the group recorded a 45.3% year-on-year increase in customers. It also upgraded its FY2022 guidance. For the year ending 30 June 2022, it now expects year-on-year revenue growth of between 35% and 37%, versus previous guidance of 29-32%.

It’s worth pointing out however, that there are other cybersecurity companies growing faster than Darktrace. Crowdstrike, for example, generated revenue growth of 74% over the 12 months to 30 June, according to my calculations. And over the next 12 months, Wall Street analysts expect top-line growth of around 46% from the company.

3 risks that could hit the Darktrace share price

Looking at the risks here, there are a few that stand out to me. One’s the fact that the company is unprofitable. The full-year results showed a net loss of $149.6m (up from $28.7m a year earlier). This is not a deal-breaker for me because it’s quite common for high-growth tech companies to be unprofitable in their early days. But it does add risk.

Another is that founder and majority shareholder Mike Lynch is facing extradition to the US on fraud charges.

A third risk is the valuation. Currently, Darktrace sports a forward-looking price-to-sales ratio of 31. That’s high. If growth slows, the share price could fall. Having said that, the valuation here’s well below that of Crowdstrike, which has a price-to-sales ratio of 53.

DARK shares: my move now

Weighing everything up, I’m going to keep Darktrace shares on my watchlist for now. The company certainly looks interesting. However, I think there are better growth stocks to buy right now.

The post Hargreaves Lansdown investors are buying Darktrace shares. Should I buy too? appeared first on The Motley Fool UK.

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Edward Sheldon owns shares of Hargreaves Lansdown. The Motley Fool UK owns shares of and has recommended CrowdStrike Holdings, Inc. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Since I last wrote about Darktrace (LSE:DARK), its share price has risen 80%. At one point, it was up 145%. As someone who did not buy Darktrace after its IPO, should I buy the current dip in its share price?

I can see a compelling investment case for Darktrace based on its growth expectations. However, I think it is a richly priced share, and I still have some lingering concerns about the company. It’s time to take another look at this share.

Darktrace, cybersecurity, and artificial intelligence

More and more activity is moving online. Thus, the need for cybersecurity is growing. Moreover, the amount and variety of digital attacks and threats are growing. Thus, Darktrace’s cybersecurity solutions are well-positioned to benefit from this trend. Also, Darktrace focuses on solutions that leverage artificial intelligence, learning the normal behaviour of a network, to flag up changes that might represent a threat that has not been seen before.

There is little doubt that Darktraces services are in demand. Darktrace grew its revenues from $17m in 2016 to $199m in 2019. The company estimates its total addressable market to be in the region of $40bn, suggesting plenty of room to keep growing. Gross margins are around 90%, which is hugely impressive.

Although the company is loss-making at the operating and net profit levels, these losses have been narrowing over the last three financial years. That would suggest that if revenue continues to grow, Darktrace will turn a profit at some stage. Revenues are indeed forecasted to grow. Darktrace estimates $278m for 2021 (final year results for 2021 will be released on 15 September 2021) and $354m for 2022, and analysts are in broad agreement.

Why have I not paid the Darktrace share price?

I did not buy Darktrace in May. I would not buy the dip in the Darktrace share price now. For one thing, revenue growth is slowing. It was 158% year-on-year in 2018 and will fall to 27% YoY in 2022 if the forecasted revenue is delivered. Of course, companies often do not sustain the high growth rates seen early in their lives. But, the Darktrace share price trades at almost 18 times its sales per share. That’s a lofty valuation, given the slowing revenue growth.

But, the main reason I did and will continue to avoid Darktrace is that I cannot quash the feeling then or now of uneasiness I get when reviewing the company. For one thing, there are those links to Mike Lynch, who is currently facing fraud allegations in the US. Lynch was a founding investor in Darktrace via his investment company, Invoke. Darktrace admitted in its IPO prospectus that there exists financial and reputational risk from its relationship with Lynch.

Darktrace spent 82% of its revenue on sales and marketing in 2020. That’s down from the 115% of the revenue the sales team gobbled up in 2018, but even so, it’s abnormal for a cybersecurity company. In sharp contrast to the sales spend, Darktrace spent 6% of revenue on R&D in 2020, which again seems low for a cybersecurity company with a claimed cutting edge product.

The Darktrace IPO was just a few months back. As more financial and operating information is released and Lynch’s trial is concluded, my questions may be answered, and I might change my mind. But for now, I am not tempted by the Darktrace share price. 

The post Should I buy the dip in the Darktrace share price? appeared first on The Motley Fool UK.

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James J. McCombie does not own any of the shares mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Rising sales

This morning’s half-year numbers from defence giant BAE Systems (LSE: BA) have been lapped up by the market. It’s not hard to see why. 

Despite the ongoing pandemic, sales rose by 6% over the first six months of 2021 to a little over £10bn. Revenue also climbed 2% to £9.3bn and profit jumped by 61% to £1.3bn. Considering the tough trading conditions, this all looks pretty reassuring. The fact that the company has also taken steps to address its pension deficit gets another tick from me.

Looking ahead, I’m confident BAE can build on this momentum. In addition to a robust £35.5bn order book, increased investment in new technology will allow the company to support customers facing what CEO Charles Woodburn described as “an evolving threat environment“.  This should really pay off, especially in areas such as cybersecurity — a potentially lucrative theme for investors that I’m tempted to tap into sooner rather than later.

Dividend hike!

Although currency headwinds could have an impact, BAE maintained its prediction that sales will grow 3%-5% in the current financial year. It also raised its guidance on underlying earnings per share to increase by the same range. 

As positive as all this is, it was news that free cash flow was expected to exceed £1bn that really grabbed my attention. Ultimately, this should be good news for the dividend stream.

Speaking of which, the company announced an interim dividend of 9.9p per share today. That’s 5% up on last year. With analysts predicting the company will return 24.5p per share in total for 2021, BAE has a forecast yield of 4.2% at today’s share price.  

It gets better. In addition to the dividend hike, the company also revealed it would be buying back £500m of its shares over the next year. This should provide some support for the price going forward. 

FTSE 100 laggard

Before markets opened, BAE shares traded on 12 times forecast earnings. That still looks great value to me.

This is not to say that the FTSE 100 stock is a risk-free investment. Yes, Covid-19 infection rates are falling in the UK but rising cases elsewhere could impact operations in other markets. As the company itself highlighted, geopolitical tensions could also prove problematic.

Based on its long-term performance, the arms titan isn’t a stock to hold for capital gains either. Although up 21% since last July, the shares have barely budged in value over the last five years and underperformed the FTSE 100!

Core holding

In sum, this top-tier chugger wouldn’t be on my list if I were searching for income and share price appreciation. If I were happy to take on more risk, there are also other companies in the same index that offer even higher yields. 

Notwithstanding this, I continue to rate BAE as a core holding for a portfolio focused on dividends. And if I were to reinvest these, the end result should be even better thanks to compounding.

The post 1 bargain FTSE 100 dividend stock to buy now appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Darktrace (LSE: DARK) share price has now more than doubled since its IPO in April. That’s a huge boost for the London market’s ambitions to attract more tech-related firms. It also indicates just how important investors believe the cybersecurity theme will be going forward.

So, is it too late to buy the stock for my own portfolio?

The Darktrace share price: reasons to be wary

As an investment, Darktrace certainly appears to have a lot of promise. Its utilises what is known as ‘self-learning AI’. In practice, this means its software learns on the job. Picking things up from real-time data rather than from past cyber hacks is patently useful since it allows a company to respond so much quicker to threats. No wonder Darktrace has been so successful in attracting customers. 

There’s also a lot to be said for the positive momentum seen in the Darktrace share price to date. Along with value and quality, this is another factor that, historically, has been shown to deliver great investment returns.  

Notwithstanding this, there are a few things to be aware of. 

Arguably, the most important of these is that this company is currently unprofitable. This could make the Darktrace share price volatile as time goes by. If inflation keeps rising, investors will become less inclined to hold ‘jam tomorrow’ stocks because cash flows aren’t expected for some time. Moreover, Darktrace could be hit by another rotation into battered value stocks that stand to benefit the most from a post-pandemic return to normality.

Regardless of macro-economic issues, there’s also the growing possibility that some traders will simply want to lock in some profit after such as great run. The likelihood of this will surely increase if Darktrace indicates it’ll shortly need to tap investors for more cash to implement its growth strategy. 

A safer option?

An alternative to buying Darktrace is for me to pick an exchange-traded fund that tracks an index of cybersecurity companies. By far the most popular example on the UK market is the L&G Cybersecurity UCITS ETF (LSE: ISPY).

One big advantage to buying this fund is that it gives me instant diversification. This protects me to some extent if the market has a wobble. Moreover, the L&G fund is very liquid. In other words, it shouldn’t be hard for a holder to sell their shares if they really needed to. 

There are however, some drawbacks. The 0.75% ongoing charge is high for a passive fund. I wouldn’t need to think about fees like this if I just bought and held Darktrace stock. 

As you might expect, the recent performance also lags the Darktrace share price. Yes, a 24% gain over the last year is hardly a bad result. Nonetheless, it does endorse billionaire investor Warren Buffett’s belief that knowledgable investors can get better results by owning just a few companies, albeit at greater risk.

I’d buy the theme

On reflection, I’m happy to sit on the sidelines for now as far as this new-stock-on-the-block is concerned. A temporary pullback in the Darktrace share price looks pretty likely, in my opinion. 

Even so, I do think it’s clear cybersecurity will become one of the most popular investing themes of this decade. For me to get some exposure at some point would be prudent.

The post The Darktrace share price has more than doubled! Should I buy? appeared first on The Motley Fool UK.

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• How to target a £10k annual income from just one year’s £20,000 Stocks and Shares ISA allowance

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Fighting fraud with cyber-security

GB Group (LSE:GBG) is a global technology firm specialising in identity data intelligence. It’s very likely we’ve unknowingly encountered its technology at some point in time if we’ve ever used online banking or ordered a product via a website.

The business operates in three segments called Location, Identity, and Fraud. The first develops and provides software solutions to clients that accurately verify customer addresses for checkout systems. Besides giving an extra layer of security, it has subsequently made the checkout process for customers much faster. In 2020 alone, this technology was used over 140 million times each day worldwide.

The Identity segment provides rapid access to identity data and security solutions. These include financial databases, biometric scanners, and bank account validation systems. For anyone who has ever applied for a new credit card or started a new job, chances are this division was involved in verifying personal information. 

The final segment is directly fighting fraud. Its risk management & intelligence software platform uses artificial intelligence to combat cyberattacks as well as identify and eliminate fraudulent activity. It is currently being used at the heart of the global banking network.

Investing in AIM stocks always has risks

AIM stocks are typically in the early stages of their business cycles. As a result, they tend to carry additional risks. But this is not my primary concern regarding GB Group.

At the core of all three of its divisions is the reliance on data collection. The General Data Protection Regulation Act (GDPR) introduced many new restrictions that limit companies’ data-gathering capabilities. While this legislation only applies to Europe, similar laws are being imposed around the world. If the firm fails to comply with these rules, it would likely have a significant legal impact on the business that would significantly damage its reputation.

The stock also has to continually invest heavily into its own cyber security. With the amount of sensitive data flowing through its platforms, any security breach could also lead to devastating reputational damage. 

In either case, if customers lose faith in the security of GB Group’s technology, it would likely result in permanent revenue loss.

The bottom line

GB Group’s technology has proven to be critical in the fight against fraud. And is already being used by an A-list of clients that include IBM, Santander, and Lyft.

Personally, I believe the need for cyber security is exponentially increasing. Combining this with its proven technology makes the potential growth of GB Group outweigh the risks, in my mind. Therefore this is one AIM stock I’d like to own in my portfolio.

The post AIM Stocks: 1 cyber-security firm I’d buy today appeared first on The Motley Fool UK.

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Zaven Boyrazian does not own shares in GB Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With cybercrime only likely to increase in the years ahead, cybersecurity companies are well positioned for growth. With that in mind, here’s a look at how UK investors can invest in cybersecurity stocks.

Investing in cybersecurity stocks

When it comes to cybersecurity stocks, the UK stock market isn’t loaded with opportunities. Most of the world’s major players, such as Palo Alto Networks, Fortinet, and Check Point Software Technologies, are listed in the US.

However, there are some companies listed in the UK that operate in this high-growth industry I’ve outlined below.

UK cybersecurity stocks

In terms of pure-play cybersecurity stocks, the London Stock Exchange has:

• Avast (market-cap £5.2bn): one of the world’s largest cybersecurity companies with over 435m users.

• NCC Group (market-cap £450m): a cybersecurity specialist that assesses, develops and manages cyber threats for its clients.

• Kape Technologies (market-cap £305m): which describes itself as the first truly global privacy and security company, owned by the public.

In addition, there’s GB Group (market-cap £1.4bn), an identity management company that offers solutions to help organisations validate and verify the identity and location of their customers. It operates in a related field.

Companies with cybersecurity exposure

There are also a number of UK companies that offer cybersecurity services as part of a broader offer. These include:

• BAE Systems: which generates around 10% of its revenues from cyber and intelligence services.

• Softcat: a technology specialist that helps public and private companies with IT services including cybersecurity.

• Computacenter: a provider of IT infrastructure that also helps public and private companies with IT services including cybersecurity. 

Cybersecurity ETFs

I’ll point out that investing in cybersecurity stocks can be a bit tricky. This is because cyber threats are continually evolving. So, it’s hard for companies that operate in the cybersecurity industry to construct sustainable competitive advantages. This means there can be a high level of stock-specific risk compared to other industries.

This is where exchange-traded funds (ETFs) can be helpful. Through one ETF, you can potentially get exposure to many different cybersecurity stocks, reducing your stock-specific risk.

There are a number of related ETFs available to UK investors today but the main one is the Legal & General UCITS Cyber Security ETF.

It provides broad exposure to cybersecurity stocks listed all over the world. This ETF, which has performed well in recent years (three-year return of about 70%), has exposure to most of the big cybersecurity players including CrowdStrike, Fortinet, and Avast.

If I was looking to invest in cybersecurity stocks today, I’d go with this ETF to get broad exposure to the industry.

The post Want to invest in cybersecurity stocks? Here’s what I’d do appeared first on The Motley Fool UK.

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• Recent BT share price performance is jaw-dropping but can it continue?
• Is the stock market correction a once-in-a-decade chance to target a million-pound SIPP?
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Edward Sheldon owns shares in BAE Systems, GB Group, and Softcat. The Motley Fool UK owns shares of NCC. The Motley Fool UK has recommended Softcat. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Despite all this, those buying the stock back when markets crashed in March will have done very well. Indeed, easyJet’s share price was flying a little over 60% higher yesterday than where it was in mid-March.

Are the shares are still worth buying? Not in my view.

Reasons to steer clear of easyJet

The arguments against buying now are both plentiful and powerful.

First, investor expectations may be unreasonably high. Even if the company manages to get more planes in the air, you’d need to be a real optimist to think that things will return to how they used to be anytime soon.

Ask your nearest and dearest whether they’d be happy to fly tomorrow. I’ll bet the majority won’t, even if middle seats were kept free. Also consider the increased costs associated with keeping planes clean and the need to offer big discounts to attract flyers in an already highly competitive industry.

All this surely has implications for profits and, ultimately, the share price. Will those who’ve recently made a packet be willing to stick around? I’m not so sure, especially as we become more aware of the full economic impact of the pandemic. Even Warren Buffett, arguably the greatest proponent of buy-and-hold investing, dumped all his airline stocks not that long ago.

Another thing worth considering is that a not-insignificant portion of easyJet’s shares are being shorted. In other words, a fair number of market participants are now betting the share will fall. These highly researched shorters don’t always get their calls right but it takes guts to go against them.

So, what would I buy instead?

As an alternative, I would suggest investing in quality, market-leading companies that, crucially, tend to be resilient in good times or bad. I wrote about one such firm earlier this month. 

Of course, if you really want some exposure to easyJet, you could push equal amounts of cash into all of the UK’s listed airlines and cross your fingers. This is less dangerous than backing the Luton-based business on its own but it does feel more akin to gambling than investing to me. It’s still a poor way of diversifying your capital as well. 

A less risky, albeit potentially less lucrative alternative would be buy a cheap FTSE 100 exchange-traded fund. This ensures at least some of your money is invested in easyJet. The remainder is spread around the rest of the UK’s biggest companies.

Another consideration, particularly in light of easyJet’s recent woes, is getting some exposure to cybersecurity stocks. The growing need for companies of all sizes to protect themselves from sophisticated hackers makes this a great option for long term defensive investors, in my opinion.

If you’d rather not sort the wheat from the chaff, then the iShares Digital Security UCITS ETF could be ideal. It tracks a basket of 113 stocks, roughly half of which are based in the US. The ongoing charge is 0.4%, making this a relatively cheap way of getting on board this mega-trend. 

The post Forget easyJet shares! Here’s what I’d buy instead appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

NCC is a cybersecurity business with a worldwide reach. It works with private and public sectors, has a presence in the UK, the rest of Europe, North America and, perhaps most important of all, a growing business in the Asia Pacific region.

The company is research-driven and has outstanding expertise in the cyber arena.

NCC shares 

NCC shares have taken a hammering since the Covid-19 crisis began. The share price fell from around 230p at the beginning of the year to 147p.

A superficial analysis would suggest that the fall in the share price is strange. After all, cybersecurity is supposed to be an area due to see rapid growth. A slightly more detailed look at the company reveals the reasons — many of its customers are struggling, and this will hit sales. Look deeper still, and the initial analysis looks about right.

Cybersecurity set to explode 

To describe cyber as an area likely to see rapid growth is like describing the sun as a region of our solar system where it is quite hot.

Cyber isn’t merely set to grow fast, business activity in this area will explode.

It was The Economist that said “data is the new oil,” and it was right. PwC projects that AI will contribute $15.7tn a year to the global economy by 2030. Data is to AI, what oil is to the internal combustion engine. It makes AI possible. However, the more data we use, the greater is the risk presented by cybersecurity.

Covid-19 and cyber 

I wonder whether the markets have understood the implications of the Covid-19 crisis and associated lockdowns in all of this. We have seen an acceleration in the move to digital. 

Post-Covid-19, I expect remote working to stay. The so-called Zoom economy is not going away, and this, in turn, creates a massive cybersecurity challenge. With employees working away from their offices, maybe accessing the internet via a router applying default passwords, the risks of data breaches grows enormously.

I expect the data economy to grow exponentially, and the risks of data breaches and need for robust cybersecurity to grow at a similar pace. Shares in companies that can offer expertise in this area may not necessarily increase exponentially, but I do expect them to increase pretty fast.

NCC has expertise in abundance. It is, by the way, working with the NHS and supporting its use of data from contact tracing apps. 

I think the fact that the NCC share price has fallen so far this year illustrates how the markets have not cottoned on to how the world is changing.

The lower share price means its P/E ratio has fallen from the giddy heights seen earlier in the year, while the dividend yield looks a lot more attractive — even if it takes a one-off knock this year, which I think is a distinct possibility.

NCC Group is due to provide a trading update following the end of its financial year to 30 May 2020 on 23 June. I, for one, am looking forward to it. As for the shares, I think they look tempting.

The post Why aren’t more investors talking about investing in this British cybersecurity company? appeared first on The Motley Fool UK.

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Michael Baxter has no position in any of the shares mentioned. The Motley Fool UK owns shares of NCC. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.