The Wild West was lawless and wildly dangerous for the average bystander. It attracted crooks, chancers and conmen. Back then, you had no choice but to protect your own holdings from the cattle rustlers, the banditos and the hostile tribes.
Today’s world seems like a different planet. But the more we live out our lives on the lawless, chaotic internet, the more we attract the attention of the same rogues’ gallery of thieves and hustlers.
In cyberspace criminals steal identities and syphon cash from transactions with impunity. They can even bring the world’s biggest institutions to their knees. The perpetrators are anonymous – and it is almost impossible to know who they are and where they are.
The sheriffs of cyberspace can only build ever-higher walls around it. So governments are investing heavily in cyber-security – the British government set aside £650m in the recent defence budget. And spooked corporations are following suit.
That’s great news for a clutch of cyber security companies charged with policing the internet. Research firm IDC expects the global network-security market alone to grow to $8.2bn in revenues this year – up 8% on 2010.
I think the fight against cybercrime is one of the most exciting penny share opportunities we’ve seen in technology for years. And today I’d like to point to a few ways you could profit.
In fact I’ve just written a special report on this very subject – I’ll show you how to get a copy later on.
The deadly impact of ‘cyber-rioting’
Computer users are often warned about the dangers that lurk online. We must not open emails from unknown sources. We must install anti-virus software. We must change our passwords.
But the real burden is not on end users, it’s on the corporations that depend on the internet. Companies take advantage of the net to reach out to customers and workers anywhere in the world. So business models are increasingly dependent on uninterrupted and secure network access.
The financial consequences of an attack are serious, but the damage to reputation can be worse. Ironically once a company suffers an attack its cherished e-commerce channel turns on it, becoming a forum for abusive blogging and customer discontent. Hard-won reputations can be lost in an instant.
Sony, for example, is facing a $200m clean-up bill and calamitous reputational damage after a series of cyber-attacks on its Playstation network earlier this year. Visa, Master Card and PayPal have been hit by ‘cyber-rioting’. The CIA and the UK’s Serious Organised Crime Agency have been attacked, as has the Hong Kong Stock Exchange. And WordPress, one of the world’s largest blog hosts, couldn’t cope with an attack that flooded its data centres with tens of millions of data packets per second.
Even the creator of the internet, Tim Berners-Lee, is pessimistic. Speaking at a recent conference, he said that “there is nothing much good about existing internet security, and a lot of work needs to be done”. Social networking is another problem, putting a torrent of extra personal information online and blurring the boundaries between the work and the social environment. Mobile internet adds still another avenue for hackers to reach us and our data.
Internet security is a moving target. New application demands new forms of protection. As cyber defenders fix one vulnerability, the criminals find another.
How I think you could profit from the multi-billion pound crimewave
All of this means that internet security is a growth industry. It has already spawned some large companies like McAfee – bought earlier this year for $7.7bn by Intel – Symantec and Kaspersky. But in this fast moving environment there are several smaller players.
On the UK stock market Endace (EDA), Digital Barriers (DGB) and NCC (NCC) are all in this area and have been reporting buoyant business. Group NBT (NBT) is another, and recently attracted a 550p per share take-over bid.
But there is one company that really stands out for me. It’s the subject of a report I’ve just written on fight against cybercrime.
This little-known penny share aims to tackle this multi-billion pound crime wave head on. It’s network security systems are proving enormously popular with spooked corporations.
This tiny London-listed company has the potential to hand a sizeable chunk of the £27bn lost to cybercriminals back to UK business just when we need it.
If they’re successful, I believe the share price of this tech-firm could rocket in the next 12 months.
• This article is taken from Tom Bulford’s free twice-weekly small-cap investment email The Penny Sleuth. Sign up to The Penny Sleuth here.
Information in Penny Sleuth is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Penny Sleuth is an unregulated product published by MoneyWeek Ltd.
Red Hot Penny Shares is a regulated product issued by MoneyWeek Ltd. Forecasts are not a reliable indicator of future results. Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Penny shares can be volatile, relatively illiquid and hard to trade. There can be a large bid/offer spread so if you need to sell soon after you’ve bought, you might get less back than you paid. This can make them riskier than other investments. Please seek advice if necessary. 0207 633 3780.