Date updated:03-29-2007
This portfolio consists of companies that focus on Computer/Internet security. The idea is twofold:
- Internet security is only going to get increasingly complex. Companies can't do without the services offered by the companies in this index.
- The big guys: MSFT and ORCL will acquire in the space.

-
SYMC
Symantec Corporat - $17.01
- -0.76%
- $N/A
Symantec, like many good companies, got hit by a failed integration of an acquisition. The idea was right, lets buy Veritas, a provider of storage software, because every corporation that needs to enhance their storage systems, will also need to secure that stored data. And they will either use us, as SYMC probably reasoned, or a competitor like MSFT. The integration, though, has gone slower than people thought it would, despite initial excitement about the idea, and the stock has faltered. However, what intrigues me is that its faltered to the extent that quality value-oriented and activist hedge funds have been scooping up shares of the stock. The company has a $15bb market cap, almost $1bb in net cash, and over $1.5bb in cash flows, giving it a multiple over cash flows of less than ten. And analysts are expecting solid growth, despite the integration troubles with Veritas. Analysts expect earnings to go from 95 cents in the year ending March, 2007, to 1.10 for the year ending March, 2008.

-
MFE
Mcafee - $37.14
- -0.05%
- $37.02
Forward P/E of 17, trades for just 11x trailing cash flows. $1.24bb cash in the bank. 20% YoY Revenue growth. David DeWalt as the new CEO comes from EMC. There is a big link between storage solutions and security (how do you secure the data being stored?). The upside of this is that it could be a new focus for MFE to get enterprise customers. The downside is that it might temporarily take them off the table as an acquisition candidate.

-
TMIC
Tmic - $0.00
- N/A
- $N/A
Makes antivirus software. Similar stats to MFE. Trades for 10x cash flows, 30% margins (that are decreasing due to competition in the space), almost 20% revenue growth. $870mm cash in the bank. My guess is it gets acquired.

-
CHKP
Check Point Softw - $32.31
- 0.00%
- $N/A
$1bb cash in the bank. No debt. Makes firewalls. Morgan Stanley recently downgraded it saying its hard for it grow market share in the space. Still, with a forward P/E of 13 and a great balance sheet it could be an acquisition candidate. The need for firewals isn't going anywhere.

-
TMWD
Tumbleweed Commun - $0.00
- 0.00%
- $N/A
Microcap. $150mm mkt cap. $30mm cash in the bank. No debt. Trades at a forward P/E of 13.

-
FIRE
Sourcefire - $22.27
- 0.00%
- $N/A
Recent IPO. Probably IPOed in order to raise money, compete, and get acquired. Its already popped off the IPO and unlike the rest of the stocks on this list, doesn't make money.

-
MSFT
Microsoft Corpora - $27.72
- -1.07%
- $27.96
Ultimately, the stock to beat. Drastically improved security features in the operating system with Vista.
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A. for two days i have been digging in this
company's ass with a microscope
A. The only one I own : SLX,
too hard pick a winner out all of them
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