Palo Alto Networks (PANW-N)

The potential to sell CRWD and buy its peers is huge. CRWD is expensive at 78x forward PE. He owns PANW instead trades at 58x. 

Is up 21% in Q2. Defense companies are spending more on cybersecurity, which benefits this.

EPS growth is up 19%, revenues 15% in the last quarter. Innovation is key in this sector and PAWN is a rapid innovator.

Lots of competition. He bought it as it came down to the 200-day MA. Still trading around the 200-day, but that continues to move higher. Long term, no doubt that cybersecurity is important. One of the better secular growth spaces.

Leads the area. Not necessarily inexpensive, but an important place to be because of its leadership and the industry it's in. Outperformed the S&P since early 2020. Has come off this year, but trendline is still moving higher.

He got out nicely before the drop. Above trendline means got ahead of itself, below means selling overdone. Pretty good long-term trend. Volatile, choppy. Right now it's showing a double top. 

Despite "sell in May", technology has a second wave then tends to go through to September. Once we get through the pause in the next couple of weeks and before we accelerate toward the election, the whole tech space will likely accelerate, including this name.

He used to own CHKP. Both PANW and FTNT are strong businesses, market leaders in the space and taking market share away from CHKP.

Challenge is that PANW and FTNT are really strong in this industry. Good for the consumer, but may not be good for the businesses in that space. At 46x PE, PANW is really expensive, growth needed to justify that valuation is substantial, high valuation keeps him on the sidelines.

Look at the space as a whole to see if you want to be involved, rather than choosing just one player. Does like the aspect of customer "stickiness" in that once a customer signs up, switching costs are high.

A lot of tech companies are down significantly from highs. 20% is a big number, but it's not vastly larger than peers on a relative basis. Cybersecurity is a desirable area right now, and this is one of the better companies. High growth has to expect more pronounced swings.

Be patient, try to time an entry point. Relatively good value right around here. High quality.

Cybersecurity has become such an important area. Governments around the world are looking as it. Huge investments in coming years at government and corporate levels. Strong secular growth. Need has increased because, since Covid, people no longer work in just one spot.

He owns CHKP instead.

Great company, a leader, profitable. Punished because of platform change, it wants to consolidate products from the different sub-sectors. Temporary pullback. Vendor consolidation makes a lot of sense, especially in cybersecurity. High growth, very expensive, but real earnings growth. Be patient.

Cyber threats won't go away. They charge cloud-based subscription services globally to businesses and governments which will pull back spending. But this will be temporary given constant cyber threats. Shares trend above the 200-day moving average. 20% EPS growth rate. Also owns Fortinet.

Are fighting this UnitedHealth computer hack. He feels even more confident in PANW than before.

Sector rotation out of tech including this stock. Continues to weaken, would wait before buying. 

Caters more to small- and medium-sized businesses. Has been around the longest. Closest competitors would be CRWD and ZS, but PANW is more international. Darwin really brings AI to the cloud in cybersecurity. February Q4 reporting beat on top and bottom, guided earnings and revenues down. Bad news already priced in. No dividend.