Cybercrime is THE crime of the 21st century… and the odds are rising that you might be its next victim. The good news is you can take easy steps to protect yourself…

The other good news is that cybercrime is creating one of the greatest investment opportunities of this century.

“Cybercrime” might sound like some sort of science fiction, but it’s very real… as these recent events show:

• 40 million credit and debit card customers saw their accounts and identities hacked at giant retailer Target.

• An international gang of cyberthieves hacked into thousands of ATMs and stole $45 million from bank customers in a matter of hours.

• A weakness in Google’s Android operating system allowed thieves to pilfer bitcoins out of users’ digital wallets.

• Yahoo Mail was hacked for months.

• Hackers recently broke into more than 10,000 everyday consumer gadgets that were connected to the Internet, such as home-networking routers, Internet-ready TVs and at least one refrigerator. They then used those gadgets to access personal financial information.

Imagine that – hacked by your own refrigerator!

In fact, any Internet-capable device in your home could be sending your sensitive financial information to cybercrooks right now.

Corporations aren’t safe, either. In fact, they’re just bigger targets. These threats are real – so real that companies are lining up to spend billions of dollars protecting themselves from malicious hackers.

But there is a silver lining. Cybercrime is not only about putting up defenses; it is also about taking advantage of once-in-a-generation investment opportunities. Global cybersecurity spending rose to a whopping $46 billion in 2013, a $4.25 billion increase over 2012.

That’s right: “Cybersecurity” is already a big business… and it’s going to get a lot bigger.

Here are three companies that should ride the “cybersecurity megatrend” – companies that could generate extraordinary profits for your portfolio.

Stock No. 1: The Company With a “Monopoly” on the Internet

VeriSign (Nasdaq: VRSN, Price: $49)

VeriSign is a company that not only handles network intelligence and security intelligence services, but also has a monopoly on one of the most important areas of the Internet. That’s because VeriSign handles the “.com” and “.net” registrations, under a multiyear contract with the ICANN (Internet Corporation for Assigned Names and Numbers), a quasi-governmental entity.

That means any time someone registers a “.com,” VeriSign makes money, which is why the company has been one of the most stable growth companies over the past five years.

Currently, the company has close to 126 million active “.com” and “.net” domain names out of 265 million domain registrations globally. VeriSign can raise the fees it charges this “captive audience” by about 10% per year through 2017, and in 2018, the lid comes off its prices – and its profit potential.

This year, VeriSign’s net income should top half a billion dollars, compared to only $143 million three years ago.

Oh, and the company is buying back its own shares. Last year, VeriSign repurchased
$1 billion worth of its own stock! Then, in January, VeriSign’s board of directors approved an additional half-billion-dollar share repurchase.

Apparently, the company believes its shares are undervalued!

Stock No. 2: A Great Value in Network Security

Check Point Software (Nasdaq: CHKP, Price: $64.77)

This Israel-based company is a worldwide leader in computer security. The company’s products enable customers to implement security processes on computer traffic between internal networks and the Internet, as well as between internal networks and private networks.

In addition, Check Point provides “ZoneAlarm” solutions that protect consumers from hackers, spyware and identity theft.

Check Point’s earnings have been growing 15% per year during the last six years.

Insiders own 22% of the company, which is an uncommonly large percentage these days. Typically, large insider ownership is a good thing because it means that management’s interests are closely aligned with that of the common shareholders.

At the moment, these insiders seem to believe their stock offers great value. Like VeriSign, Check Point is also buying back $1 billion worth of its own stock.

Stock No. 3: A Tech Security Titan With a Nice Dividend!

CA Technologies (Nasdaq: CA, Price: $29.06)

CA Technologies is the old Computer Associates. The company started as an antivirus company, but it is now one of the largest cloud-based software developers. Specifically, CA provides solutions that help customers manage and secure complex IT environments. Increasingly, businesses use CA Technologies’ software to securely migrate data from their localized data centers to the cloud.

There’s a big – and growing – demand for CA Technologies’ solutions, which is why the company’s earnings have been growing nearly 20% per year over the last six years.

Somewhat incredibly, despite the company’s rapid growth trajectory, its stock sells for less than 10 times estimated 2014 earnings, which is about 40% cheaper than the S&P 500 Index!

Therefore, like both VeriSign and Check Point, CA is actively repurchasing its stock. The company repurchased around 4 million shares for $140 million during the last three months of 2013 and plans to spend an additional $167 million buying stock in 2014.

CA does not only spend corporate cash to buy back stock however, it also pays a hefty 3.4% dividend! And the company has plenty of cash to continue buying back stock and to pay or increase its dividend. At last count, CA was sitting on more than $1 billion in net cash.

All things considered, you could call CA a “growth stock that is selling at the price of a value stock.”

All three of these companies – VeriSign, Check Point and CA Technologies – are sure to have their ups and downs over the next few years… and the “downs” might come first. But over the long term, I am expecting much bigger ups than downs.

All three companies are on the leading edge of the cybersecurity megatrend and are well-positioned to generate impressive earnings growth for years to come.

Good investing,

Sean Brodrick
for Free Market Café