Palo Alto Networks (PANW)

Volatile. It and its cybersecurity peers sold off last Novembers over investor fears that this sector can be disrupted by AI. The sector is a little safer among software stocks. He likes this as a hold, but have to be patient and dollar-cost average down. 

Deals with online security. Don't buy because of its valuation - it is too expensive. Everyone attached to the security market is focusing on the top line. Checkpoint (CHKP) is cheaper. Palo Alto is good too.

He's been in this name before, but doesn't own anything in the space right now. All the names are pricey. A larger player, but it's not inexpensive.

The Cyberark acquisition will be accretive.

Cybersecurity recently is seeing a modest correction over a feeling that IT spending will pull back. This is puzzling, but the cyber threat remains and there's a need for security. We need strong guidance from PANW to see positive momentum. They report today.

Likes their purchase of CyberArk which will be accretive.

Really likes it, especially because they bought CYBR (one of his stocks ;)  Difficult call at this point. His price target is $185, and today it's trading ~$177. Then it will have to digest CYBR (still needs both regulatory and shareholder approval). China may use this as a pawn in negotiations. 

For new $$, he'd choose ANET instead.

CRWD and PANW are volatile, but demand is so strong for cybersecurity that these are long-term winners.

Cybersecurity is the utility of technology, a necessity. Not economically sensitive, so won't get a big boost in a strong economy. But it's very consistent.

He could own this, but doesn't. Instead, he owns CRWD and a cyber ETF. Expectations in the group are high, and the multiples aren't cheap. He doesn't actually have a ton of tech exposure right now, having moved to more economically sensitive names.

Reasonably priced. Safer than CRWD, though slower-growing. Overall security software space is very attractive -- one of the most defensive parts of the software industry.

They report Tuesday. It has a habit of falling after reporting earnings, so wait until after the report.

Cybersecurity is a mega-trend long term. Bit expensive at 50x forward PE for 13% growth, and that growth rate has come down. That's why he sold. Great channel of higher highs and higher lows.

They've maintained momentum recently even as other tech stocks have come down. Whereas Fortinet and Crowdstrike specialize in parts of cybersecurity, PANW does it all and does very well in small/medium-size companies.

He sold and put profits into CRWD (and then took profits on that, too). Like FTNT, still great names to own long term, as cybersecurity threats are only going to get bigger. Secular demand for software and services will continue. PANW is 53x forward PE, for 15% earnings growth, so he needs a lower PE to be interested. Capex slowdown from businesses in this area.

Has a great platform strategy and products; growing cash flow to $4.5 billion by year's end. Will rebound as they execute.