Check Point Software Technologies (CHKP)

Oct 12, 2016
Financial Safety

Today I picked up a few shares of Check Point Software Technologies (CHKP). CHKP is in the business of IT security including network security, cloud security, and data security. If there is some form of information you need to protect, CHKP probably has a product available for you. CHKP competes against a number of other companies including Fortinet (FTNT), Palo Alto Networks (PANW), and CyberArk Software (CYBR). IT security is a big concern in the modern market, with major security threats includingthe credit card hacks of Target and Home Depot, the loss of personal health information from hospitals, or the email hacks of presidential candidate Hillary Clinton and the Democratic party. Cyber security is becoming a bigger part of life, and therefore companies that are poised to protect that information will likely grow in the future as these hacks become more common and more sophisticated.

CHKP has a longer history than most of the other companies listed and they have been shown to be able to generate positive income. That track record gives them a large edge over FTNT, PANW, and CYBR. In addition, the P/E ratio of CHKP is only around 20, whereas the other companies listed could be as high as 200. The price per share is also fair for me, at $75 a share it was easier to pick up multiple shares compared with Palo Alto Networks (who would have known Palo Alto would be so overpriced). One other company that I had considered was Cisco Systems (CSCO) because Cisco is also a long standing company with many security products. However, Cisco has expanded far beyond IT security, which allows it to generate new revenue streams, but because it does not specialize, I believe this makes it less competitive in the realm. Also with the departure of Cisco's CTO and Cloud Exec, there may be some shake up in leadership which may negatively affect the price of the stock.

TipRanks Analyst has rated CHKP as Moderate Buy, Thomsom Reuter rates it as Positive, S&P Capital IQ rates it 3 stars out of 5, SmartConsensus Reports rates it as Buy, and Market Edge Second Opinion is Long.

One thing I did take away from this purchase was that I was able to get these shares for several dollar less than the market price. I was able to do this by setting a buy limit well below the current market price. So during a period of inactivity, the system bought up shares that were likely on a stop-loss or stop-limit sell. Immediately after I bought the shares, the value of the stock climbed back up to the original market price meaning instant positive returns on investment. In the future, this may be a useful technique for acquiring shares at a discount.