With recent high-profile hacking events on the minds of many investors who are considering the potential negative impact such events may have on businesses within their portfolio, finding a company with the potential to take advantage of much of this negative publicity can be a hard thing to do.
I’m going to discuss why BlackBerry Ltd. (TSX:BB)(NYSE:BBRY) may be the perfect company for investors concerned about long-term tech security.
Security is akin to reputation
As Warren Buffett has famously repeated over the years, it really does take a lifetime to build a reputation and a few seconds to ruin it. The fundamental basis on which companies in the tech security industry rely on is reputation; as can be seen from the recent high-profile hack of Equifax Inc. (NYSE:EFX), significant stock price depreciation is a prescient threat every tech company faces should a hack be discovered. In the case of Equifax, the company’s stock price has rebounded to the $110 level since hitting a 52-week low below $90 following the announcement of a security breach; however, the company’s stock remains nearly 25% below its 52-week high seen earlier this summer.
With few tech companies retaining a laser-like focus on security in the same was as BlackBerry, investors betting that the Canadian software company will continue to innovate within the tech security space certainly have a bull case to invest in companies such as BlackBerry as a defensive play in a tech sector which many see as being overheated at current valuation multiples.
The autonomous vehicle industry is perfect for BlackBerry
Of the various concerns touted by pundits today, the risks associated with the autonomous vehicle industry in security is among the top headwinds many bears point to first. Should vehicles be prone to hacks, having a computer running one’s vehicle may not seem like such a good idea after all.
The security and integrity of the operating systems running the core operating functions of autonomous vehicles becomes a clear selling point for auto manufacturers in this space — so much so that companies like BlackBerry will likely be able to charge a premium for their software; it’s a scenario many shareholders are putting their money on.
With the Canadian tech company making the full transition from a hardware-focused company to a software-only business model, the results have been very positive, at least early on. The company has maintained a better-than-expected pace in turning a profit, with improving expectations relating to the company’s medium- to long-term profitability driving BlackBerry’s stock price higher by nearly 50% year to date.
The $100 million investment CEO John Chen has made in the company’s autonomous vehicle segment is the catalyst many believe will make BlackBerry an indispensable part of a growing industry for decades to come. The potential upside with BlackBerry remains one of the reasons I reiterate why now may be a good time to take a bite out of this tech player at its current level.
That said, headwinds related to the recent departures of two of the company’s top executives, as highlighted by fellow Fool analyst Haris Anwar, remain thorns in the side of the company’s management team, as it attempts to continue rolling out new IP and better and more improved innovative solutions for auto manufacturers.
Stay Foolish, my friends.
5 stocks we like better than BlackBerry Ltd.
When investing Guru Iain Butler and his shrewd team of analysts have a stock tip, it can pay to listen. After all, the newsletter they began just three years ago, Stock Advisor Canada, is already beating the market by 9.6%. And their Canadian picks have literally doubled the market.
Iain and his team just revealed what they believe are the five best stocks for investors to buy right now… and BlackBerry Ltd. (USA) wasn’t one of them! That’s right – they think these five stocks are even better buys.
*returns as of 5/30/17
Fool contributor Chris MacDonald has no position in any stocks mentioned in this article.