Almost a decade ago I took a close look at network security stock Palo Alto Networks Inc. (PANW-Q) At the time, a number of prominent hacking incidents (Sony’s Playstation network among the biggest) and heightened security concerns surrounding the adoption of cloud computing created an obvious need for cybersecurity. I didn’t buy it in the end – the stock price was acting in a way I didn’t understand near the US$40 level.
I generally don’t concern myself with missed opportunities – no active investor should expect to participate in every positive trend – but with Palo Alto’s stock price now near US$175 it’s hard not to develop a case of the What If?s .
The case for network security remains strong. It’s only May 3rd and there’s already been a prominent security incident this month - customer information was stolen from U.S. telecommunications giant T-Mobile, according to Tech.co.
The biggest annual network security conference has just concluded and Morgan Stanley technology analyst Hamza Fodderwala was in attendance. Mr. Fodderwala’s conversations left him more confident in corporate spending levels on cybersecurity despite U.S. recession fears.
The sector as a whole traded lower by 10 per cent last week after two companies, Tenable Holdings Inc. and Cloudflare Inc., reported disappointing earnings results. Morgan Stanley, however, expects the remainder of the related stocks to announce profits in-line or exceeding consensus estimates. Recent price weakness could prove a good buying opportunity for Mr. Fodderwala’s top picks Palo Alto and Fortinet Inc. (FTNT-Q)
I’m not going to buy Palo Alto specifically – it would feel too much like chasing, even after so many years – but a related company is tempting. Any further price weakness in the sector will have me re-doubling efforts to research promising, well-valued opportunities.
-- Scott Barlow, Globe and Mail market strategist
This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.
Stocks to ponder
Skeena Resources Ltd. (SKE-T) Year-to-date, the share price of this exploration and development company is up 36 per cent, making it the 22nd best performing stock out of 255 stocks in the S&P/TSX SmallCap Index. Analysts anticipate the positive price momentum will continue. The stock has a unanimous buy call from 10 analysts and a one-year expected return topping 60 per cent. Jennifer Dowty looks at the investment case.
Topicus.com Inc. (TOI-X) This company is the largest stock on the TSX Venture exchange, with a market cap of about $7-billion. Yet, it’s off the radar of many investors and doesn’t have any analyst coverage. Topicus is an acquirer of vertical market software companies that provide what are known as mission-critical solutions to customers who use their software. Fund manager Robert Gill explains why it’s one of his top stock picks for his submission to the Globe Investing Club.
Rogers Communications Inc. (RCI-B-T) Year-to-date, the stock has been a laggard. The stock price is up 6 per cent in 2023, matching the return for the S&P/TSX Composite Index but falling short of the 9-per-cent return for the S&P/TSX communication services index. However, the stock may gain traction later this year, says Jennifer Dowty, who looks at the investment case.
Shopify Inc. (SHOP-T) This has been the best-performing stock within the S&P/TSX 60 Index this year, putting a lot of pressure on the e-commerce company as it gets ready to report its first-quarter results on Thursday. David Berman tells us about what to expect.
The Rundown
Divided recession opinions are good news
Feeling confused about the economy? You’re not the only one. The World Economic Forum announced Tuesday that 45 per cent of the chief economists it surveyed in its most recent poll say a global recession is likely this year. This would be a disturbing number – except that another 45 per cent of chief economists say precisely the opposite. Prominent Wall Street strategists are similarly torn. Bank of America’s Savita Subramanian sees plenty of reasons why U.S. stocks will beat consensus estimates. Michael Wilson at Morgan Stanley and Matt King of Citigroup perceive lots of reasons they won’t. What to make of all this? Ian McGugan shares his insight.
Also see: Recession talk tapers off on latest quarterly conference calls
Others (for subscribers)
John Heinzl’s model dividend growth portfolio as of April 30, 2023
Number Cruncher: With big tech reporting in the U.S. last week, how do Canadian technology companies look?
Wednesday’s analyst upgrades and downgrades
Tuesday’s analyst upgrades and downgrades
The most oversold and overbought stocks on the TSX
Poll: Gold to hover near record highs as interest rates near peak
Globe Advisor
Will Sell in May work this year? Here’s what to consider when deciding whether to stay invested
How to invest in the space race as recent setbacks highlight risks, uncertainty and cost of failure
Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’’ portfolios.
Ask Globe Investor
Question: Does it make sense to ask for my shares in paper certificate form to avoid the possibility of them being lost in a bankruptcy of my bank-owned broker? What is involved in getting paper share certificates?
Answer: Brokers typically charge a fee of about $50 to have share certificate issued in your name through the company’s transfer agent. However, with electronic record-keeping supplanting paper, some companies no longer issue physical share certificates. In such cases, your shares would be held in “DRS” (direct registration system) form by the transfer agent.
“The benefit of keeping your shares in DRS book-entry is not having to worry about safeguarding your certificates and avoiding the potential cost to replace them,” Computershare, one of Canada’s largest transfer agents, says on its website.
However, unless you plan to enrol your shares in the company’s dividend reinvestment plan operated by its transfer agent, I don’t see a compelling reason to move them from your broker. It’s highly unlikely that a bank-owned investment dealer would go bust. But if your broker ever does get into trouble, you are well-protected by the Canadian Investor Protection Fund.
--John Heinzl (E-mail your questions to jheinzl@globeandmail.com.)
What’s up in the days ahead
Shares in Aritzia Inc. plunged on Wednesday after the clothing retailer released quarterly results. What should investors make of this? David Berman will share some insight.
Click here to see the Globe Investor earnings and economic news calendar.
More Globe Investor coverage
For more Globe Investor stories, follow us on Twitter @globeinvestor
Compiled by Globe Investor Staff