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Cyber Attacks: A National Security Threat Largely Being Ignored

Fin - Daily Ticker - US

In April, hackers shut down Sony's PlayStation Network, stealing more than 2 million credit card numbers and 100 million account holders' identities.

Earlier this month the world was shocked to learn Gmail accounts of top government officials had been hacked. The company claims China is behind the attack; Beijing strongly denies the accusations.

But the most troubling of the recent cyber attacks, according to Stephen Leeb, Chairman of Leeb Group, is the news in late May that Lockheed Martin, the largest U.S. government contractor, suspended VPN access and reset all passwords following a cyber attack against its network using information stolen from RSA Security's SecurID.

"I can't think of anything on the corporate level that would be more serious than to attack our leading defense contractor," Leeb tells the Daily Ticker's Aaron Task. "How many secrets in the computers of Lockheed are there that are vital to the security of this nation?"

On the heels of this news, there were reports last week that two more of the country's largest contractors, Northrop-Grumman and L-3, were hacked in a similar fashion using compromised RSA SecurID data.

These stories prove, Leeb says, that cyber security is an increasingly serious issue for corporate America. "Companies store secrets on the Internet," he says. But what troubles him even more is the threat to national security. "The ability to get in and steal secrets is a huge, huge issue, and its not one weren't paying any attention to."

With that in mind, Leeb owns and recommends investing in three of the leading cyber security firms, believing investment in the industry is set to grow by leaps and bounds in the near future.

His picks are:

CACI International (CACI). He recently writes in a Seeking Alpha post, "CACI gets
most of its revenues and profits from defense IT. It may also be the world's smallest de facto monopoly: It deals with highly classified information and its employees require high-level security clearances, so any potential rivals would have a tough time poaching employees, information or business methodologies."

ManTech (MANT). As he also mentions in the Seeking Alpha analysis, "its primary clients are the U.S. intelligence community and Federal agencies from the Department of Homeland Security to the Army to DARPA. ManTech enjoys some of the same competitive edges as CACI, including a 'security clearance monopoly' that puts would-be rivals at a disadvantage."

EMC (EMC). Ironically, his third pick is the owner of RSA Security, the company at the center of the Lockheed Martin cyberattack. EMC owns 80 percent of VMWare, a key player in "cloud computing," which he claims will be key to the future of corporate cyber security. He recommends EMC instead of directly buying VMWare because it currently trades at a cheaper valuation.