With hacking incidents on the rise, it's perhaps not surprising that cyber security stocks are outperforming the broader market.
Bessemer Venture Partners, which invests in startups, has created a new BVP Cyber Index, tracking 29 public companies whose primary business is cybersecurity.
"Cyber as a domain continues to deliver a tremendous amount of value to the shareholders who have been able to allocate portions of their portfolio to this," said Sunil James, vice president at Bessemer Venture Partners.
BVP said in a news release that the IT Security sector diverged from the market three and a half years ago, and has since posted more than twice the gains of the Nasdaq and S&P 500. Additionally, the BVP Cyber Index also revealed periods of solid outperformance in the weeks following news reports of major security breaches, with the sector performing five times better than the overall market following such incidents. And, of course, business is good for cybersecurity companies who have to try to outsmart attackers.
"Over the last 10 to 15 years we've seen an ever increasing amount of attackers realizing that there's a tremendous amount of monetary gain to be had by attacking many of the Fortune 100 companies," said James. "These attackers continue to change their tactics. They continue to adapt what they're doing to break through existing defenses."
BVP projects that investment in IT security will double over the coming five years, to $200 billion.
Bessemer Venture Partners has funded 36 early stage cyber security companies over the years. BVP's other investments include companies like Pinterest, LinkedIn (LNKD) and Skype.