Outperforming fund manager is bullish on these cybersecurity stocks, citing more room for growth
Cybersecurity is one area that presents an opportunity for investors right now, according to portfolio manager Philip Ripman of Storebrand Asset Management. “I think various areas within the market are still attractive, especially within the cybersecurity areas,” he told CNBC Pro Talks on Wednesday. It’s one area that still hasn’t “experienced that kind of growth,” he added. The Global X Cybersecurity ETF is up nearly 9% year-to-date — similar to the S & P 500 , but underperforming the Nasdaq , which is around 20% higher so far this year. Stock picks Ripman, who manages the $1 billion Storebrand Global Solutions fund, which has a focus on sustainability, is bullish on two cybersecurity firms in particular: Palo Alto and Crowdstrike . “These companies are well positioned for further growth,” he said. Palo Alto is “a little bit of an older business model,” said Ripman, but added that it’s set to snap up smaller companies which will really add to its portfolio of offerings. Crowdstrike, on the other hand, has been one of the “premier growth stories” within the space over the past five-to-10 years. “And it obviously is one of those companies, which is an endpoint security company, but really is a one-stop-shop for your security needs,” Ripman said. Both stocks are among the top 10 holdings in his fund, with Palo Alto accounting for 3.8% of the fund, and Crowdstrike at 3.7%. Palo Alto shares have soared around 37% year-to-date, and analysts covering the stock give it a further 17% potential upside, according to FactSet. Some 77% of analysts covering the stock give it a buy rating. Shares of Crowdstrike have also jumped in the same period, up roughly 30%. According to FactSet, analysts give it a further 22% potential upside, with a 76% having a buy rating on the stock. Staying out of mega-cap tech Looking ahead, Ripman thinks there’s a possibility there will be a pullback, depending on whether a recession comes to fruition. And he pointed out that the fortunes of the U.S. stock market are dominated by a few mega-cap companies. “Without the performance of those four to five companies, the market will be looking very differently,” he said, adding that the artificial intelligence trend has “definitely shifted the narrative” on four of those companies. Seven companies — Apple , Microsoft , Nvidia , Meta , Tesla , Amazon and Alphabet — accounted for 95% of the S & P 500?s total return in the first quarter . Ripman doesn’t hold any of mega-cap tech names such as Apple or Microsoft in his portfolio, despite the sector being an investor favorite. Rather, the portfolio manager at Storebrand Asset Management selects stocks based on the themes he believes will be “essential in the years to come,” he told CNBC Pro Talks on May 17, such as renewable energy and smart cities. Ripman’s fund avoids companies that make over 5% of their revenues from fossil fuels, tobacco, alcohol, war and other vice-related activities. It ranks top for 10-year annualized returns (15%) on Morningstar’s list of global mega-cap equity funds.
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