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* “We do see positive secular growth trend in cybersecurity.
Cybersecurity is getting increasingly more complex. Some companies
describe that as an unfair battlefield where advisories have a lot of
resources behind them. It can be hackers, nation states, or sponsor
groups, versus small or medium enterprises and then IT teams that have
limited resources. By nature, IT infrastructure does require more
sophisticated automation and then more proactive cyber knowledge that
they can leverage from the major cybersecurity players.

* Our view is that investment in cybersecurity offers an appealing
profile, meaning enterprises have choices whether to invest part of the
IT security for the downside say if a cybersecurity incident happens.
There is some research that the rates of cybersecurity incident costs
are going up every year, and it can be somewhere in the range of
multiple million dollars.

* C suite and executives will keep prioritizing cybersecurity
investment regardless of the macroeconomy. There is the downside risk of
not investing enough in cybersecurity. It is always a concern.

* In terms of the business model cybersecurity companies generate
revenues through multiple revenue streams. One major stream is
subscription. It’s a subscription based economy, meaning when you buy
hardware, then there’s a choice of what subscription features you want
to add to your hardware. Customers need multiple cybersecurity elements
so they pay for multiple subscriptions. The subscription economy is
favorable because it creates visibility into the revenue streams.
Customers are tied into multi-year contracts. Even if the macro economy
turns sour the subscriptions will continue and then usually we don’t see
a high attrition rate.

* We are a value investor and Check Point falls more into the value
camp, meaning that we can assess checkpoint valuation multiple based on
EBITA multiple. Many cybersecurity names are growth names and trade
based on their revenue multiple. Checkpoint is championing the idea that
customers want industry consolidation meaning that instead of utilizing
dozens of different cybersecurity software, or cybersecurity solutions
that don’t necessarily talk to one another. They want to champion the
idea of a consolidated cybersecurity platform that offers rich
cybersecurity features. Cybersecurity is a resilient defensive sector as
a whole.

* Fortinent. We like it because it has a strong competitive advantage.
What Fortinet does well is that it offers multiple security functions on
one platform at an attractive price at a bundle. Instead of buying
separate solutions for your cybersecurity, this is like is just like a
big case of security functions at a more attractive price."