Tuesday, October 18, 2011

Web Security - Next Bubble?

Web Security - Next Bubble?

In an earlier post, we reviewed the many revolutionary steps that are taking place in Wall Street and the amount of disruptive technology that is making many functions and processes currently done by humans, obsolete.  One way PFG believes to play this new world is to own a basket of web security stocks.  Not only do we believe this is great hedge for our long term-short vol thesis, the stocks are fairly priced in the market.

At this point, we cannot find an ETF, but are very sure one will probably get listed.  The current events of protesters, hackers and the recent outage at blackberry are pointing more and more for a “real need” for stronger online security.  No exec wants to make it easy to access his personal info, no bank wants client information reveled and a caring father wants his daughters pictures of the web asap.  The uprising of social media tools, supporting the narcissistic facebook epicenter of global information is just staggering.  Many companies exist currently to help with managing your global identity, however they cannot do much once information security has been comprised.  As the world moves on-line, forced faster then ever before to reduce costs and adapt these new disruptive technologies, PFG believes on-line security will be at the top the list with compliance at most banks. In addition, it will also be the front gate for data mining, real time business intelligence and accessing proprietary correlation data.


We are building a position on this equal weighted basket on dips in the market, with a 12m + time horizon, unless we reach our 25% upside target sooner.  We started building our position on Oct 12 2011 and set the index to 100.  The basket was down 21.5% for the year before we decided on this thesis.

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