Condor Capital Management

Explore: Check Point Software Technologies (CHKP)

Check Point Software Technologies (CHKP)

Condor Capital recently initiated a position in Check Point Software Technologies (CHKP), a leading provider of internet security products for businesses and consumers, in the Large Cap Growth Strategy.

Cyber Crime Becomes Sophisticated

While the concept of hacking computers has been around for decades, recent high-profile operations, such as the theft of 40 million credit card numbers at Target, have left many worried.  The Office of the National Counterintelligence Executive estimates that the U.S. alone suffers more than $10 billion in financial losses a year due to different types of cybercrime.  Moreover, research firm Gartner Inc. estimates that the worldwide security market could grow to $86 billion by 2016 from just $67 billion last year.  Within this realm, Check Point is the largest pure-play network security vendor and second-largest network security provider in the world.  The company has served customers for almost two decades, which has allowed it to establish its presence in this highly competitive space.  In the coming years, online infrastructure is expected to become more complicated and, as mobile devices increase internet penetration globally, the need for cyber security should be heightened even more.

Rock-Solid Fundamentals

In addition to the company’s strong position in the network security market, Check Point maintains robust financials that has afforded it additional flexibility to adapt.  With over $1.3 billion in cash reserves and a debt-free balance sheet, the company has recently made updates to many of its offerings in order to better compete in the market.  Furthermore, its healthy financial position should allow for greater acquisition activity, which could help it to stay ahead of competitors such as Symantec and Cisco.  Even with an eye towards expanding its product line and acquiring niche firms, management has returned capital to shareholders, and recently increased its share repurchase program.

Businesses are waking up to the fact that cyber security threats from all over the world are rapidly evolving and are here to stay for the long-term.  As a result, we believe that Check Point Software Technologies is positioned for further growth due to this favorable backdrop and its solid portfolio of offerings.  All told, we believe that CHKP presents itself as a solid investment for long-term investors.

comic - March 2014