In 2014, cybersecurity stocks were all the rage. With every big data breach that hit the news from companies like Target (NYSE:TGT), Home Depot (NYSE:HD), Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL), the stocks of companies that provided threat detection software and services became more and more valuable. FireEye (NASDAQ:FEYE) jumped more than 130% in the first quarter of 2014 alone at its peak. From the beginning of 2014 through the middle of 2015, Fortinet (NASDAQ:FTNT) more than doubled. Palo Alto Networks (NYSE:PANW) more than tripled.
The combination of high valuations, increased cash flow burn and lack of profits knocked many cybersecurity stocks back down to earth. The consolidation of the sector will likely continue for the foreseeable future making picking individual companies a real challenge. Investors are likely better off buying one of the ETFs that focus on the industry - the PureFunds ISE Cybersecurity ETF (NYSEARCA:HACK) or the First Trust Nasdaq Cybersecurity ETF (NASDAQ:CIBR).
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