The Trend

Crisis and Opportunity: Were You Even Aware of This?

Over the last several years, we’ve had our legs cut out from under us.

Consumers have had their most private information exposed.

Their credit cards, social security numbers, even bank account information has been exposed for the world to see. Even the FDA once warned that medical devices and the technology behind them do not offer enough cyber security.

In fact, according to the FDA in early 2017, vulnerabilities in pacemakers and insulin pumps can be manipulated to cause lethal attacks. St. Jude Medical was even warned that its devices were vulnerable to cyber attacks that could allow third parties to control them.

In 2016, more than 50% of Americans were hacked and they don’t even know about it. 

Attackers weren’t just stealing your information. They were changing it. Consumer devices were being held for ransom. Imagine turning on your smart phone only to find out that criminals are running code on your device.

You’ve seen the headlines.

Leaked malware from the NSA threatened Windows users all over the globe. A group called The Shadow Brokers released what was seen as severe and potent software capable of breaking into any system that runs Windows. 

Sony lost $200 million in an attack. Hackers stole personal information from 233 million users. 

Another attack cost Target $248 million. Yet another one cost Home Depot $43 million.

An employee at the Department of Revenue clicked on what appeared to be an innocent link. Seconds later, a hacker had access to 3.6 million social security numbers, and nearly 400,000 credit card files.

A hack at the Office of Personnel Management exposed 22 million people.

Yet, in early 2017, not many were prepared for the next attack.  According to a survey of 600 corporate boards by the National Association of Corporate Directors at the time, only 19% of them have an understanding of risks.  Up to 75% of all U.S. companies are not prepared.  Up to 65% haven’t devoted the time or resources to prepare. 

Microsoft predicted that by 2020 data volumes online would be 50 times greater than what it is right now with 111 billion lines of new software code produced each year.

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What can investors learn from all of this?  As crisis creates opportunity, we begin to look at beaten-down stocks that could rally on such news, like Palo Alto Networks (PANW), for example.  After getting beaten down on poor numbers, stocks like these offer opportunity.

In April 2017, the stock sported the cheapest valuation it has seen in years, as impatient investors sold their stakes, tired of waiting for numbers to improve. 

We could see that in the technical argument as well.  In fact, as you can see in this three-year chart, the stock (as of April 17, 2017) fell to double bottom support with oversold relative strength (RSI), MACD and Money Flow (MFI).  We saw the same thing happen in early January 2016 with the same technical markers before the stock began to move aggressively higher.

Again, thanks to a growing crisis, the opportunity became apparent.