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2015's Biggest Data Breaches and the Investing Angle

By Joe Tenebruso - Jan 12, 2016 at 6:43AM

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The digital world is an increasingly dangerous place.

Cyberattacks are growing in size and sophistication. In 2015, organizations of all types suffered data breaches, some of which exposed millions of records of sensitive personal information. Fortunately, there are some businesses that can help protect you -- and your portfolio.

Here's a quick look at some of the major breaches of 2015.

Organization

Description

VTech Holdings (NASDAQOTH: VTKLY)

Electronic toy maker VTech was hit by a data breach that compromised its Learning Lodge app store customer database and Kid Connect servers. The breach affected 12 million people, including 6.4 million minors. The hack exposed personal information such as profile photos, chat logs, names, email addresses, mailing addresses, passwords, download history, and children's gender and birth dates. 

Experian (EXPG.Y -1.17%)T-Mobile (TMUS -0.85%) 

Credit information company Experian suffered a breach that exposed the personal information of approximately 15 million T-Mobile customers. The data included names, birthdates, addresses, and possibly Social Security numbers. The attack also highlights how consumers can be affected by the security lapses of companies they don't conduct business with directly. 

The Federal Office of Personnel Management

In what may be the single most damaging breach to U.S. national security of all time, The Federal Office of Personnel Management announced that a cyberattack compromised the records of 22 million current and former government employees. Hackers gained access to highly sensitive information contained on security clearance applications and background investigations for personnel in fields such as law enforcement and national intelligence, including 5.6 million fingerprint records. 

Ashley Madison

The hacker group identified as The Impact Team exposed the information of 37 million users of Ashley Madison, a website that encourages its users to have affairs. The compromised records include account profile information, financial records, and more. Worse still, the breach likely affected an untold number of marital relationships. 

Anthem (ANTM -0.88%)

Anthem, the nation's second-largest health insurer, was the victim of the largest healthcare data breach in history. The attack exposed approximately 80 million highly sensitive patient records -- and potentially an additional 19 million non-patient records -- that included names, birthdates, Social Security numbers, addresses, and employment data. 

Investing angle
Unfortunately, it appears no organization is immune from the threat of cyberattacks. But fortunately -- for security service providers -- effective cybersecurity solutions are becoming a critical part of doing business, with demand for their services set to soar in the years ahead. In that regard, investors may wish to take a look at FireEye (MNDT -0.13%), Palo Alto Networks (PANW -1.02%), and LifeLock (LOCK) -- three of the best investment opportunities available in the security sector today.

Image source: FireEye.

FireEye is a leader in the $30 billion market for next-generation cybersecurity. Unlike traditional forms of security such as firewalls and anti-virus software, which are capable of defending against known threats, FireEye's virtual-machine-based security platform provides real-time threat protection against so called zero-day exploits -- attacks on vulnerabilities that, up to that point, were unknown to the security community.

FireEye's protection system is further strengthened by its Threat Intelligence subscription service, which collects data from its global network of virtual machines to constantly update its system to defend against newly discovered threats. In this way, network effects fortify FireEye's value proposition; each additional customer adds more data points, which strengthens FireEye's protection services and makes them even more appealing for both new and existing customers. It's a virtuous cycle that should continue to benefit FireEye and its growing network of users.

Image source: Palo Alto Networks.

In addition to FireEye, Palo Alto Networks is widely considered one of the best-of-breed cybersecurity companies. Palo Alto Networks offers a broader suite of products than FireEye, including a highly regarded network firewall. In addition, Palo Alto's Wildfire cloud-based advanced threat prevention system is a formidable competitor to FireEye, and it benefits from similar community-based intelligence network effects.

A powerful combination of new customer acquisitions and more business from existing accounts is fueling strong growth across Palo Alto Networks' business lines. That, in turn, has allowed the company to take share in the rapidly growing cybersecurity market. Investors are beginning to take notice, with Palo Alto Networks' stock up about 30% over the last year. Yet the potential for tremendous growth remains, and Palo Alto Networks' stock price appreciation could foreshadow even greater gains in the years ahead.

Image source: LifeLock.

While FireEye and Palo Alto Networks specialize in cybersecurity for businesses, LifeLock excels at providing identity theft protection for consumers. LifeLock's services go beyond the typical credit card and personal information monitoring offered by the major credit bureaus, to include non-credit alerts and Internet ID theft ring tracking. Additionally, if a customer is exposed to identity theft, LifeLock will spend up to $1 million to hire recovery experts to help remedy the situation.

The seemingly never-ending assault of cyberattacks is boosting demand for LifeLock's offerings, with the company adding 251,000 new subscribers during the third quarter of 2015 -- a 16% increase from the prior-year period. Notably, LifeLock's members have also been willing to pay more for upgraded services, with third-quarter monthly average revenue per member increasing 6% year over year to $11.91. And maybe most importantly, LifeLock is doing an admirable job of retaining its customers, as evidenced by its 86.6% annual retention rate.

As data-breach concerns continue to stoke fears of identity theft among consumers, expect LifeLock's sales to continue to benefit from the worrisome trend.

Joe Tenebruso has no position in any stocks mentioned. The Motley Fool owns shares of and recommends FireEye. The Motley Fool recommends Anthem, LifeLock, and Palo Alto Networks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

LifeLock, Inc. Stock Quote
LifeLock, Inc.
LOCK
Palo Alto Networks, Inc. Stock Quote
Palo Alto Networks, Inc.
PANW
$516.51 (-1.02%) $-5.33
Mandiant, Inc. Stock Quote
Mandiant, Inc.
MNDT
$22.86 (-0.13%) $0.03
T-Mobile US, Inc. Stock Quote
T-Mobile US, Inc.
TMUS
$143.61 (-0.85%) $-1.23
Anthem, Inc. Stock Quote
Anthem, Inc.
ANTM
$477.11 (-0.88%) $-4.22
Experian plc Stock Quote
Experian plc
EXPG.Y
$35.47 (-1.17%) $0.42

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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