Despite the stock market’s more than 10% rally over the last 2 weeks, it’s still far from certain that a new bull market has begun. So far, there has been some but not too much damage from the Fed’s rate hikes on employment and corporate earnings.

However, inflation has also remained stubbornly high which means these elevated rates will remain at least for the next 3-6 months. At this point, it’s likely that earnings will start to feel impacted and the unemployment rate should tick higher which would commence the next stage of the bear market.

Amid these challenging circumstances, investors should focus on companies and sectors whose prospects are going to improve regardless of economic conditions. One example is cybersecurity as the increased digitalization of the world only increases the urgency and importance of the sector.

In fact,  these companies continue to deliver earnings growth while their total addressable market (TAM) continues to expand at a healthy clip. It’s a necessity for every company to secure its cloud infrastructure and IT stack which are increasingly integral to daily operations. It’s also an area of national security importance as cyberspace is another frontier on which countries battle. Given the bear market in stocks and improving prospects for cybersecurity stocks, investors should consider buying these 2 stocks:

Checkpoint (CHKP)

CHKP is a security as service provider, targeting large and mid-sized organizations to defend, archive, and organize their sensitive data. It offers protection against threats, email security, cloud security, threat detection, and solutions to enable secure communication. 

The need for IT and email security is only going to expand in the coming years, and CHKP is one of the leading firms in this category. Email security is one of the largest markets with an estimated billion users while remaining relatively untapped. However, this is also one of the biggest points of vulnerability.

CHKP is attractive from a growth and value perspective. Next year, the company is forecast to increase earnings by 31% which is quite impressive in a market where growth opportunities are scarce. Additionally, the stock is quite cheap with a forward P/E of 16.3 which is close to the market average despite higher growth and very attractive 35.1% profit margins.

CHKP has an overall rating of B according to the POWR Ratings. The stock also has an A rating for Quality which is consistent with the bulk of Wall Street analysts having a Buy rating on the stock. 

Given the selloff in tech and cybersecurity stocks, CHKP’s status as one of the highest-quality cybersecurity companies makes it a good fit for the portfolio as it will be able to continue growing amid a tough environment. It also has no financial risk given its low debt and substantial cash holdings. Click here to see more of CHKP’s POWR Ratings.

Fortinet (FTNT)

FTNT is a provider of cybersecurity and networking solutions and services. Its customers include enterprises, communication service providers, government organizations, and small businesses.

It’s a leading provider of firewall services and VPN services. Its premier product is FortiOS, which is a network operating system to manage network security appliances. Its cloud security offerings are available for deployment in public and private cloud environments and include application security.

Like QLYS, FTNT has been an outperformer relative to the sector and broader tech industry. While most tech stocks have been mired in a brutal bear market, FTNT has consolidated in a tight range, indicating that institutions are using adverse market conditions to accumulate shares. 

Next year, FTNT’s earnings per share are expected to increase from $0.81 per share to $1.31 per share which is nearly a 60% increase in earnings. Given these strong fundamentals and trajectory, it’s not surprising that FTNT is rated a B by the POWR Ratings which translates to a Buy. B-rated stocks have posted an average annual performance of 21.1% which compares favorably to the S&P 500’s average annual growth of 8.0%. Click here to see more of FTNT’s POWR Ratings.

CHKP shares closed at $127.83 on Friday, up $0.54 (+0.42%). Year-to-date, CHKP has gained 9.67%, versus a -17.15% rise in the benchmark S&P 500 index during the same period.

Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles.

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