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15 Best Security Stocks to Buy Now

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·18 min read
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In this article, we will be looking at the 15 best security stocks to buy now. To skip our detailed analysis of the cybersecurity industry, you can go directly to the 5 Best Security Stocks to Buy Now.

According to Goldman Sachs, security software and cybersecurity stocks saw a huge rally in 2020, and this development was further propelled forward by the now infamous cyberattack on SolarWinds Corporation (NYSE: SWI) that took place in December 2020. The cyberattack led to not only the US government threatening the imposition of sanctions on Russian intelligence officials but even to President Biden's recently surfaced cybersecurity order brought up this May to improve the country's resilience in the face of cyberattacks. The order has also resulted in a range of cybersecurity and related stocks, like CrowdStrike Holdings, Inc. (NASDAQ: CRWD), Palo Alto Networks, Inc. (NYSE: PANW), and Cloudflare, Inc. (NYSE: NET), gaining headway in recent months.

It's not just security in the online sphere that's faring well and proving to be a profitable investment opportunity either. Even the home security systems market share has been growing, with a recent research report on the market stating that the market for home security systems in North America reached about $7.23 billion just last year. Newer developments such as the arrival of new and improved technologies offering greater security and the restarting of constructional activities in the researched region have been identified as the main drivers of the market's growth and the increasing demand for newer and better security systems within the US.

Such developments have led to more money being poured into security stocks, particularly cybersecurity stocks. This has especially been the case because of an increased frequency of cyberattacks in the last year alone, with a report from Canalys stating that about 12 billion records were attacked last year, and ransomware attacks were up 60%. Canalys also estimated a 10% increase in spending on cybersecurity this year, in light of the growing demand for more robust security systems across the world. As such, the security sector is set to become more profitable by the day, and we have thus compiled a list of the 15 best security stocks to buy now.

Investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Best Security Stocks to Buy Now
Best Security Stocks to Buy Now

Photo by Jefferson Santos on Unsplash

Without further ado, let's look at the 15 best security stocks to buy now. The stocks added to our list below were selected on the basis of hedge fund sentiment, analysts' ratings, fundamentals, and growth potential based on core business strengths.

Best Security Stocks to Buy Now

15. Ping Identity Holding Corp. (NYSE: PING)

Number of Hedge Fund Holders: 11

Ping Identity Holding Corp. (NYSE: PING) operates under the name of Ping Identity Corporation and provides intelligent identity solutions for the enterprise in the US and internationally. The company ranks 15th on our list of the best security stocks to buy now.

This June, Ping Identity Holding Corp. (NYSE: PING) acquired SecuredTouch, which will be integrated into its new cloud platform, PingOne, to provide consumers with advanced intelligence about potentially fraudulent activity they may be victim to. The same month, Needham began coverage of the stock with a Hold rating and analyst Mike Cikos commented that he was optimistic about the company's leading position in the Identity Access Management market, which is worth $25 billion.

In the first quarter of 2021, Ping Identity Holding Corp. (NYSE: PING) had an EPS of $0.04, beating estimates by $0.01. The company's revenue was $68.94 million, up 12.26% year over year and beating estimates by $6.12 million, and it has a gross profit margin of 79.37%.

As of the end of the first quarter of 2021, 11 hedge funds held stakes in Ping Identity Holding Corp. (NYSE: PING), worth roughly $873 million. This is compared to 16 hedge funds in the previous quarter with a total stake value of $1.16 billion. Like CrowdStrike Holdings, Inc. (NASDAQ: CRWD), Palo Alto Networks, Inc. (NYSE: PANW), and Cloudflare, Inc. (NYSE: NET), Ping Identity Holding Corp. (NYSE: PING) is a good security stock to invest in.

Baron Discovery Fund mentioned Ping Identity Holding Corp. (NYSE: PING) in its first-quarter 2021 investor letter. Here's what they said:

“Ping Identity Corporation offers Identity and Access Management (“IAM”) solutions enabling secure network and software access to employees, partners, and customers. Shares fell after the company outlined a more complex pandemic-driven spending environment in which enterprise projects were awarded in smaller pieces and deployments were extended over longer periods of time. This enabled clients to conserve valuable working capital, but obviously negatively impacted Ping’s revenue growth rate. The good news is that these smaller projects ultimately will become fully implemented IAM solutions, which will drive accelerating growth as the pandemic recovery takes hold. We also expect Ping to further hone its sales process to drive increased numbers of customers. Our research continues to show that Ping’s enterprise solutions are among the best available and that its current trading multiple makes it one of the best “growth at a reasonable price” software names around.”

14. Ribbon Communications Inc. (NASDAQ: RBBN)

Number of Hedge Fund Holders: 15

Ribbon Communications Inc. (NASDAQ: RBBN) is a provider of communications technology in the US, Europe, the Middle East, and internationally. The company makes IP-based real-time communications security and related software solutions, alongside providing other products and services. It ranks 14th on our list of the best security stocks to buy now.

This March, B. Riley reiterated its Buy rating on Ribbon Communications Inc. (NASDAQ: RBBN) with a $14 price target. The company has itself also provided guidance for the financial year 2021 of revenue of $925 million to $945 million, versus the consensus of $930.45 million.

In the first quarter of 2021, Ribbon Communications Inc. (NASDAQ: RBBN) had an EPS of $0.03, beating estimates by $0.01. The company's revenue was $192.77 million, up 22.02% year over year but missing estimates by -$0.74 million, and it has a gross profit margin of 58.63%. The stock has gained 6.31% in the past 6 months and 15.35% year to date.

As of the end of the first quarter of 2021, 15 hedge funds held stakes in Ribbon Communications Inc. (NASDAQ: RBBN), worth roughly $51.5 million. This is compared to 10 hedge funds in the previous quarter with a total stake value of $37.7 million. Like CrowdStrike Holdings, Inc. (NASDAQ: CRWD), Palo Alto Networks, Inc. (NYSE: PANW), and Cloudflare, Inc. (NYSE: NET), Ribbon Communications Inc. (NASDAQ: RBBN) is a good security stock to invest in.

13. ADT Inc. (NYSE: ADT)

Number of Hedge Fund Holders: 16

ADT Inc. (NYSE: ADT) is a provider of security, automation, and smart home solutions to consumers and business customers in the US. The company provides fire detection, fire suppression, video surveillance, and related products and services and ranks 13th on our list of the best security stocks to buy now.

This May, Deutsche Bank upgraded ADT Inc. (NYSE: ADT) to Buy with a raised price target of $10. Analyst Kunal Madhukar has become bullish on the stock in light of the ADT+ Google solution, which he commented may be more robust than initially expected.

In the first quarter of 2021, ADT Inc. (NYSE: ADT) had an EPS of -$0.07, missing estimates by -$0.21. The company's revenue was $1.30 billion, beating estimates by $32.54 million, and it has a gross profit margin of 71.62%. The stock has gained 14.04% in the past 6 months and 28.44% year to date.

As of the end of the first quarter of 2021, 24 hedge funds held stakes in ADT Inc. (NYSE: ADT), worth roughly $283 million. This is compared to 24 hedge funds in the previous quarter with a total stake value of $281 million. Like CrowdStrike Holdings, Inc. (NASDAQ: CRWD), Palo Alto Networks, Inc. (NYSE: PANW), and Cloudflare, Inc. (NYSE: NET), ADT Inc. (NYSE: ADT) is a good security stock to invest in.

Miller Value Partners, an investment management firm, mentioned ADT Inc. (NYSE: ADT) in its fourth-quarter 2020 investor letter. Here's what they said:

ADT Inc. (ADT) declined 3.5% during the quarter. The company reported strong 3Q results, which showed continued net subscriber growth with record customer retention (attrition of 12.9% versus 13.5% last year). The company reported revenue of $1.30B versus consensus of $1.25B with EBITDA of $564M versus $524M expected. The company updated full year guidance to revenue of $5.20-5.35B versus consensus of $5.24B and EBITDA of $2.15-2.225B versus $2.144B expected and free cash flow (FCF) guidance of $650-725M (raising the lower end by $25m from previous guidance). The company has set 2H21 as the time frame to launch their professionally installed and co-branded offering with Google (ahead of mid-2022 guide) and they announced that they are developing an ADT-owned, next-gen, residential technology platform allowing them to use their own proprietary software.”

12. OSI Systems, Inc. (NASDAQ: OSIS)

Number of Hedge Fund Holders: 20

OSI Systems, Inc. (NASDAQ: OSIS) is a manufacturer of electronic systems and components, operating globally. The company has three segments: Security, Healthcare, and Manufacturing. It ranks 12th on our list of the best security stocks to buy now.

This April, OSI Systems, Inc. (NASDAQ: OSIS) secured several contracts including a $480 million IDIQ contract for border inspection technologies, and a $16 million contract for security inspection systems, alongside a $5 million order for the maintenance of security inspection systems in March as well. In April. B. Riley raised its price target on OSI Systems, Inc. (NASDAQ: OSIS) from $104 to $118, reiterating a Buy rating on the stock as well.

In the fiscal third quarter of 2021, OSI Systems, Inc. (NASDAQ: OSIS) had an EPS of $1,38, beating estimates by $0.04. The company's revenue was $283.79 million, surpassing the previous quarter's $276.01 million revenue, and it has a gross profit margin of 36.95%. The stock has gained 2.92% in the past 6 months and 7.56% year to date.

As of the end of the first quarter of 2021, 20 hedge funds held stakes in OSI Systems, Inc. (NASDAQ: OSIS), worth roughly $87.5 million. This is compared to 16 hedge funds in the previous quarter with a total stake value of $81.1 million. Like CrowdStrike Holdings, Inc. (NASDAQ: CRWD), Palo Alto Networks, Inc. (NYSE: PANW), and Cloudflare, Inc. (NYSE: NET), OSI Systems, Inc. (NASDAQ: OSIS) is a good security stock to invest in.

11. CACI International Inc (NYSE: CACI)

Number of Hedge Fund Holders: 21

CACI International Inc (NYSE: CACI) is a provider of information solutions and services in North America and internationally. The company also provides cybersecurity solutions and supports cyber support for federal customers and the intelligence community, alongside other services. It ranks 11th on our list of the best security stocks to buy now.

This June, CACI International Inc (NYSE: CACI) secured an $82 million contract with the US army alongside another $109 million contract for Naval Supply Systems Command with Booz Allen Hamilton, Science Application International, Capstone, and Serco. Goldman Sachs has a Buy rating alongside a $316 price target on CACI International Inc (NYSE: CACI) as of this June, while Wells Fargo initiated coverage on the stock in May with an Overweight rating and a $311 price target.

In the fiscal third quarter of 2021, CACI International Inc (NYSE: CACI) had an EPS of $4.78, beating estimates by $1.08. The company's revenue was $1.55 billion, up 5.89% year over year and surpassing the previous quarter's $1.47 billion revenue, and it has a gross profit margin of 35.25%. The stock has gained 9.35% in the past 6 months and 8.13% year to date.

As of the end of the first quarter of 2021, 21 hedge funds held stakes in CACI International Inc (NYSE: CACI), worth roughly $632 million. This is compared to 28 hedge funds in the previous quarter with a total stake value of $512 million. Like CrowdStrike Holdings, Inc. (NASDAQ: CRWD), Palo Alto Networks, Inc. (NYSE: PANW), and Cloudflare, Inc. (NYSE: NET), CACI International Inc (NYSE: CACI) is a good security stock to invest in.

10. Commvault Systems, Inc. (NASDAQ: CVLT)

Number of Hedge Fund Holders: 23

Commvault Systems, Inc. (NASDAQ: CVLT) is a provider of data protection and information management software applications and related services in the US and internationally. The company ranks 10th on our list of the best security stocks to buy now.

This May, Piper Sandler raised its price target on Commvault Systems, Inc. (NASDAQ: CVLT) from $84 to $86, keeping its Overweight rating on the shares. In the fiscal fourth quarter of 2021, Commvault Systems, Inc. (NASDAQ: CVLT) had an EPS of $0.59, beating estimates by $0.11. The company's revenue was $191.34 million, up 16.14% year over year and beating estimates by $9 million, and it has a gross profit margin of 84.88%. The stock has gained 36.65% in the past 6 months and 43.41% year to date.

As of the end of the first quarter of 2021, 23 hedge funds held stakes in Commvault Systems, Inc. (NASDAQ: CVLT), worth roughly $533 million. This is compared to 23 hedge funds in the previous quarter with a total stake value of $555 million. Like CrowdStrike Holdings, Inc. (NASDAQ: CRWD), Palo Alto Networks, Inc. (NYSE: PANW), and Cloudflare, Inc. (NYSE: NET), Commvault Systems, Inc. (NASDAQ: CVLT) is a good security stock to invest in.

9. Fortinet, Inc. (NASDAQ: FTNT)

Number of Hedge Fund Holders: 23

Fortinet, Inc. (NASDAQ: FTNT) is a provider of broad, integrated, and automated cybersecurity solutions in the US, Europe, and internationally. The company ranks 9th on our list of the best security stocks to buy now.

This June, Fortinet, Inc. (NASDAQ: FTNT) was mentioned as one of the top cybersecurity stock picks by Wedbush Securities, which also commented this May that President Biden's cybersecurity order after an attack at the Colonial Pipeline is set to bolster enterprise cloud stocks like Fortinet, Inc. (NASDAQ: FTNT). Cowen also raised its price target on Fortinet, Inc. (NASDAQ: FTNT) to $270 this June, with a reiterated Outperform rating on the shares.

In the first quarter of 2021, Fortinet, Inc. (NASDAQ: FTNT) had an EPS of $0.81, beating estimates by $0.07. The company's revenue was $710.30 million, up 23.12% year over year and beating estimates by $29.48 million, and it has a gross profit margin of 78.07%. The stock has gained 68.63% in the past 6 months and 71.62% year to date.

As of the end of the first quarter of 2021, 23 hedge funds held stakes in Fortinet, Inc. (NASDAQ: FTNT), worth roughly $906 million. This is compared to 32 hedge funds in the previous quarter with a total stake value of $1.22 billion. Like CrowdStrike Holdings, Inc. (NASDAQ: CRWD), Palo Alto Networks, Inc. (NYSE: PANW), and Cloudflare, Inc. (NYSE: NET), Fortinet, Inc. (NASDAQ: FTNT) is a good security stock to invest in.

8. Rapid7, Inc. (NASDAQ: RPD)

Number of Hedge Fund Holders: 25

Rapid7, Inc. (NASDAQ: RPD) is a provider of cybersecurity solutions and offers a cloud-native insight platform that allows customers to create and manage analytics-driven cybersecurity risk management programs. The company ranks 8th on our list of the best security stocks to buy now.

This July, Rapid7, Inc. (NASDAQ: RPD) has launched the industry's first completely integrated cloud-native security platform, InsightCloudSec, that enables users to enhance their cloud-security programs. Additionally, Mizuho holds a Buy rating on Rapid7, Inc. (NASDAQ: RPD) as of this May.

In the first quarter of 2021, Rapid7, Inc. (NASDAQ: RPD) had an EPS of -$0.03, beating estimates by $0.03. The company's revenue was $117.45 million, up 24.5% year over year and beating estimates by $3.06 million, and it has a gross profit margin of 70.07%. The stock has gained 14.01% in the past 6 months and 10.66% year to date.

As of the end of the first quarter of 2021, 25 hedge funds held stakes in Rapid7, Inc. (NASDAQ: RPD), worth roughly $151 million. This is compared to 21 hedge funds in the previous quarter with a total stake value of $218 million. Like CrowdStrike Holdings, Inc. (NASDAQ: CRWD), Palo Alto Networks, Inc. (NYSE: PANW), and Cloudflare, Inc. (NYSE: NET), Rapid7, Inc. (NASDAQ: RPD) is a good security stock to invest in.

7. Verint Systems Inc. (NASDAQ: VRNT)

Number of Hedge Fund Holders: 26

Verint Systems Inc. (NASDAQ: VRNT) is a provider of customer engagement solutions across the world, and the company also offers management cybersecurity services alongside a range of other products and services. It ranks 7th on our list of the best security stocks to buy now.

This June, Verint Systems Inc. (NASDAQ: VRNT) offered guidance for the financial year of 2022, with a forecasted revenue of $842.8 - $877.8 million, versus the $862.20 million consensus, a 30-30% increase in cloud revenue, and an EPS of $2.23. The company has also been initiated at Evercore ISI with an Outperform rating and a $75 price target.

In the fiscal first quarter of 2021, Verint Systems Inc. (NASDAQ: VRNT) had an EPS of $0.44, beating estimates by $0.08. The company's revenue was $201.94 million, beating estimates by $4.84 million, and it has a gross profit margin of 69.2%. The stock has gained 24.04% in the past 6 months and 30.16% year to date.

As of the end of the first quarter of 2021, 26 hedge funds held stakes in Verint Systems Inc. (NASDAQ: VRNT), worth roughly $526 million. This is compared to 20 hedge funds in the previous quarter with a total stake value of $596 million. Like CrowdStrike Holdings, Inc. (NASDAQ: CRWD), Palo Alto Networks, Inc. (NYSE: PANW), and Cloudflare, Inc. (NYSE: NET), Verint Systems Inc. (NASDAQ: VRNT) is a good security stock to invest in.

Bernzott Capital Advisors, an investment management firm, mentioned Verint Systems Inc. (NASDAQ: VRNT) in its first-quarter 2021 investor letter. Here's what they said:

“Verint Systems (VRNT): This customer experience software provider completed its planned spin-off of its Cognyte Software unit on February 1. The poor contribution to return for the quarter does not reflect value from the separated unit and is therefore a bit of a statistical artifact. At the end of the quarter, the company reported good results and reaffirmed targets outlined in its January 2021 analyst day as the company continues to manage its transition to a subscription software model.”

6. Check Point Software Technologies Ltd. (NASDAQ: CHKP)

Number of Hedge Fund Holders: 31

Check Point Software Technologies Ltd. (NASDAQ: CHKP) is a developer of a range of products and services for IT security, and the company operates across the globe. It ranks 6th on our list of the best security stocks to buy now.

This July, Check Point Software Technologies Ltd. (NASDAQ: CHKP) announced that it will be extending its multi-cloud support through its integration of the Check Point CloudGuard solution with the Alibaba Cloud. This integration will allow Alibaba Cloud users to access Check Point Software Technologies Ltd.'s (NASDAQ: CHKP) cloud networked security and services. In May, Check Point Software Technologies Ltd. (NASDAQ: CHKP) also received an Outperform rating and a $140 price target from Cowen.

In the first quarter of 2021, Check Point Software Technologies Ltd. (NASDAQ: CHKP) had an EPS of $1.54, beating estimates by $0.04. The company's revenue was $507.60 million, up 4.34% year over year and beating estimates by $4.61 million, and it has a gross profit margin of 89.25%. The stock has gained 2.60% in the past year.

As of the end of the first quarter of 2021, 31 hedge funds held stakes in Check Point Software Technologies Ltd. (NASDAQ: CHKP), worth roughly $494 million. This is compared to 26 hedge funds in the previous quarter with a total stake value of $775 million.

Harding Loevner, an investment management firm, mentioned Check Point Software Technologies Ltd. (NASDAQ: CHKP) in its first-quarter 2021 investor letter. Here's what they said:

“Another software holding, Israeli security firm Check Point, saw its shares fall after announcing that investments to fund its future growth will reduce margins this year.”

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Disclosure: None. 15 Best Security Stocks to Buy Now is originally published on Insider Monkey.