Palo Alto Networks (PANW)

His model price is $45.18. It is coming back to 159.20 and the fundamental value is $45.18. If it goes to $148.48 he would be a seller. It looks like it is coming back to support at EBV +9. $202 is the street consensus, 29% upside.

A Canadian cyber security stock or ETF? He doesn’t know of any Canadian companies, and rather than using an ETF he would prefer an individual company like this one. ETF’s are going to include some names that are not necessarily 100% into cyber security. This is one that he is looking at very seriously. (See Top Picks.)

He has used it as a top pick. It is in the very timely network security area. Companies are having to spend a lot of money to protect their networks. They continue to grow their earnings. There is risk in a stock like this. Seasonally it is coming into a tough period. Technically it is fine, but there are some cracks in this market that are concerning him. You may choose to buy it cheaper in the fall.

Security is a very important theme in the market. There are a couple of themes that have big tailwinds right now. Certainly the Internet of things, i.e., connected devices to the Internet, which means it is a great thing for semiconductor and software companies. The big issue that a lot of companies have right now is security risk, which is an a bull market right now. Companies that can help mitigate that are doing really well. This company appears to be the winner in this space. Their most recent quarter had 55% revenue growth and beat the estimate by about 12%. They are seeing consistent increases in the estimates coming from analysts. It is expensive, but he feels the analysts are being too conservative with their estimates of earnings and revenue growth.

(Top Pick Aug 29/12, Down 33.31%) A disappointment for him. Grew service business, but we are seeing a shift away from infrastructure stocks. IT is a service rather than licensed hardware and software. Would not have expected this to affect them this quickly. Don’t be quick to sell it.

Stock is expensive but what he finds exciting is that he sees a clearer runway for this company to continue to beat expectations. This is the “next generation” firewall. Applications are much more sophisticated and can get through old firewalls and initiate programs within your application. This company has come up with the ability to basically, on one pass, analyze those packets that are coming and be “application aware” and “network protocol aware” to do everything that static firewalls couldn’t do. Thinks they are 2 years ahead of the competition with that.