The Elite 6 of Cybersecurity

 | May 28, 2015 | 4:12 PM EDT
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Sometimes when you have a broad theme, the money seeks out whatever investments it can find in the space.

That's the way it's developing in the cybersecurity and organic and natural spaces.

Last night's quarter from Palo Alto Networks (PANW) is an excellent case in point. Here's a company that may be the single hottest stock in the universe of enterprises I follow.

While we have always found the stock to be expensive, in many ways it deserves to be expensive. The premier best-of-breed cybersecurity company gave you 55% revenue growth, beating the estimates by 5% and lifting sales by 8% from the previous quarter, signaling some amazing order wins. Plus it bought a company, CirroSecure, which works on cloud security, bolstering what will be recurring revenue in the subscription area -- the best kind. The company is huge overseas but you didn't hear any complaints from CEO Mark McLaughlin, one of our favorites, because business is accelerating everywhere.

Remember, McLaughlin told us that ever since cybersecurity became a "board level issue" -- meaning that there's a chunk of time being spent with board members about the need to spend money on this issue -- business has been accelerating. Palo Alto offers a soup-to-nuts option and is known for its prevention strength. With no let-up in growth and new clients begging for help, Palo Alto represents the quintessential company that executives want to bring in to please the board and assuage the shareholders that management is doing everything it can to stop cyber-crimes.

Palo Alto is part of an elite group of pure plays on cybersecurity. FireEye (FEYE) is the ultimate in cybersecurity forensics and is now the go-to company in order to avoid liability for cyber-crimes, as it has earned a federal government seal of approval that says your company's doing everything it can to stop cyber-intrusions. It's a terrific company with best-of-breed technology to find out who is hacking, and when you see any big hacking -- Sony (SNE), Home Depot (HD), Target (TGT) -- you almost presume they are getting the call.

CyberArk's (CYBR) got the keys to the kingdom, assuring that nobody hijacks the entire internal security system. It's run by a bunch of brilliant Israeli Defense Force guys who seem to thrive on protecting the inside of the cyber-defense ring.

Fortinet's (FTNT) got terrific technology for threat protection. It's less even in earnings than some of the other companies, but it serves as a pure play. And I like Checkpoint (CKP), even as it was downgraded the other day to a sell at Morgan Stanley. I think this segment is too hot to take any player to a sell.

Finally, if you want to think big, the name on everyone's lips for security integrated and embedded into the Internet infrastructure, that's Cisco's (CSCO) bailiwick. I think it is far too underestimated as the ultimate in security for the future. That's another reason why the stock's too cheap not to invest in.

When you have a shortage of stocks to play a theme, you can levitate for a very long time as we see in the companies that offer organic and natural product lines. Hain Celestial (HAIN) and WhiteWave (WWAV) are the only pure plays and we know from Hormel's (HRL) purchase of Applegate, you either get more organic and natural or you fail to meet the demand of the millennials, who won't always be millennials. They will be majoritarians. That's why I like both of those stocks.

And it's why I think you can still buy any cybersecurity stock. We are in the early innings and we don't have enough choices so they will all get their due and trade higher even as they are among the most expensive stocks in the entire market. High growth and cybersecurity equals scarcity value and when you have scarcity demand overwhelms supply in any business and the price of the merchandise -- in this case the stocks -- almost ineluctably goes higher.

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