How to Profit from the Coming Cyber Wars

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Hillary Clinton is the leading US Democratic Party candidate. That means if US primaries were on tomorrow, Clinton would win. And she would be running for President next year.

But things might be about to change…

As a former US Secretary of State it’s fair to say she has some pretty strong connections in the US government. She is also a former First Lady.

Thus it’s fair to say she has access to a fair bit of top-secret information.

As a person in her position, digital security is very important. And in a typical case the Department of Homeland Security (DHS) would give a person in such a position a ‘secure’ email server.

Well that’s not the case for Clinton.

In fact her choice of email server could swing the US primaries. And in turn impact the 2016 US Presidential elections.

Who would have thought an email server could be so important? And who would have thought her decision would create some of the best investment opportunities of the 21st century?

Sounds daft doesn’t it? An email server affecting a presidential race. But as of this morning, the FBI is looking into Hillary Clinton, and not in a good way. Her email set up at home is ‘unusual’ according to government officials.

She doesn’t use the typical government email set up. Instead she has a private account set up by a Denver-based company.

And this is now under question due to one big factor. The security of her email. Remember, Clinton is privy to top-secret information. And the government is worried about the security of said information.

They like control and right now with Clinton, they don’t have it.

Let’s me ask you something.

Assume you had to choose between two email set-ups. Your decision is solely based on the security that email will provide. Nothing else.

One is an email that a national security government agency sets up for you.

The other is an email server set up by a private technology company.

Which do you choose? It sounds like a straightforward answer right? You’d go with the government one. Wouldn’t you? Surely they would have the highest level of security?

Well…maybe not.

Government versus industry

Speaking to Business Insider, Immunity Inc. senior security researcher Alex McGeorge said,

Government cybersecurity experts know that government servers will be compromised no matter what, so they are fully prepared to get hackers off the system as soon as possible.’

But the real question isn’t if they’re prepared. The question is can they do something about it. In the cyber security industry it common knowledge the best hackers don’t work for the government.

No. They work in the non-government cyber industry. Both privately held and publicly listed companies.

Why do they avoid the government? Well it’s because they want to be paid better for one thing. Much better. But it’s not all about the money.

Some hackers (WhiteHat hackers, the good guys) do it to genuinely make a difference. They don’t want to deal with the bureaucracy and red tape of government departments. They see a problem and they know they can help to fix it. They just want to get on with it.

I was speaking to some hackers last night. In a jovial way I asked if they did it for the love or money. They said the money is good, in fact great. But they do what they do because they just love the work. They want to make a difference. And importantly they know how to fix the problems.

These guys see themselves as modern day knights of the round table — and they’re kind of right.

They exist and thrive in a digital world where they thwart cyber attacks on a daily basis. And many of them work for publicly listed companies. These hackers are the guys you want fighting on your side in this digital battle.

And the companies they work for are the companies you want your investment money in.

I bring this up because I’m currently at BlackHat USA 2015. This is the world’s biggest international security conference.

Attending are the best and brightest security experts, and some of the most experienced and talented hackers in the world.

These are the guys and girls the government comes to when they’ve got a problem. Not the other way around. And that’s why Clinton’s decision to use a private company for her email server is so important.

She decided to get a private company to set up the system for her. Not the government. The issue isn’t the way her system’s set up. The point is she felt a private company would do a better job. And the fact is, a private company will do a better job than the government.

And that’s exactly why there’s only one side to turn to as a consumer and as an investor with when it comes to safety, security and making money in cyber security.

Like shooting fish in a barrel

When you want to secure a network, lock out cyber attackers and protect your data you turn to private enterprise. You don’t go to your local MP and ask for help.

Your need, your company’s need even your local MP’s need to have digital protection increases every day. And over the coming years as the Internet of Things grabs hold of us, this need will exponentially increase.

When it comes to the ‘Internet of Things’ (IoT) we’re talking billions of devices. Things like a connected fridge, smart home, connected car and fitness tracking technology.

It’s literally ‘things’. Mundane, everyday objects connected online. What that means is that manufacturers are now becoming software vendors.

For example, think of Whirlpool, the washing machine maker. Whirlpool doesn’t just make washing machines. They are now a software vendor too. And therein lies a responsibility to protect not just their machines, but also their software too. They have to secure it, update it and patch it when hackers find a flaw.

That also means Whirlpool has to spend money on getting help to secure their products. And that means money flowing to digital security companies that help them achieve this.

Now where this gets really good for investors is that investment in digital security companies right now is like shooting fish in a barrel. You basically can’t miss.

The need for digital security is so immense and growing so fast that many security companies don’t even need to look for customers. They actively have other companies and governments knocking on the door asking for help.

One of the key takeaways from BlackHat today is how important digital security is in the modern world. This is driven in part by the natural growth of the internet. But it’s really getting intense because of the explosion of the IoT.

Importantly it’s not an issue that’s restricted to any one country. Companies from all over the world are a part of this.

If you’re only interested in investing in Aussie companies, that’s great. There are several nitro-charged cyber security companies right now that you can invest in. But these aren’t household names, they’re small-cap Aussie companies that most of the mainstream ignore. They ignore these companies because they don’t understand them.

And crucially they don’t understand the industry they’re in and how important it is for the future.

Cyber defence is an investors market right now. Both domestically and internationally. By that I mean there are a number of great companies, many on the ASX that you can invest in.

These companies will be the foundation of our digital world. The future of the internet, the IoT and the connected world are in their hands. As I see it, this is the best investment opportunity of the 21st century.

Do you have investments in digital and cyber defence companies? If not, why not?

Regards,

Sam Volkering,

Editor, Australian Small-Cap Analyst

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Sam Volkering
Sam is Editor for Money Morning and it's small-cap and technology analyst. He spends his time hunting down the most exciting stocks on the planets, whether they’re potential-packed volatile small-caps or tech firms transforming our future through cutting-edge technologies. You can find more of Sam’s work over at Australian Small-Cap Investigator, where he shares the best small-cap stocks he finds on the ASX, or at Revolutionary Tech Investor where he reveals the latest breakthrough tech investment he’s discovered.
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