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Ticker Symbol: HACK

Gunnar November 12, 2014 No Comments

I think the financial equivalent of jumping shark is Wall Street creating an ETF based on your theme. If so, cybersecurity has arrived. The ISE Cyber Security Index provides a benchmark for investors interested in tracking companies actively involved in providing technology and services that are designed to protect data, networks, hardware, software, and other cyber-dependent devices from unauthorized access and attacks. The index includes twenty-nine constituent companies, including VASCO Data Security International Inc. (ticker: VDSI), Palo Alto Networks Inc. (ticker: PANW), Symantc Corp. (ticker: SYMC), Juniper Networks Inc. (ticker: JNPR), FireEye Inc. (ticker: FEYE), and Splunk Inc. (ticker: SPLK). Before you invest your life savings in ETFs, listen to Vanguard founder Jack Bogle: “The ETF is like the famous Purdy shotgun that’s made over in England. It’s great for big game hunting, and it’s great for suicide.” Two interesting things to look at in ETFs are fees and weighting. The fees on this puppy look to be 0.75% – outlandishly high. For comparison Vanguard’s Dividend Growth ETF has a 0.1% fee. It is true that with foreign ETFs the fees are higher (to access foreign markets), but I do not know why HACK should have such a high fee – the shares they list are liquid and widely traded. Foreign issues themselves do not seem to dictate such a lavish expense ratio. As of October 30, 2014, the Underlying Index had 30 constituents, 6 of which were foreign companies, and the three largest stocks and their weightings in the Underlying Index were VASCO Data Security International, Inc. (8.57%), Imperva, Inc. (6.08%), and Palo Alto Networks, Inc. (5.49%). I cannot tell how it is weighted but if they follow the weighting on ISE then investors will wind up almost 10% into Vasco. The largest members of the index, per ISE, are: Vasco: 9.17% Imperva: 7.57% Qualys: 5.48% Palo Alto: 5.35% Splunk: 5.18% Infoblox: 5.04% That is near 40% in the top six holdings – pretty concentrated. The old school way to index is to weight by market capitalization, but that has been shown to be imperfect because size alone does not determine quality. The preferred weighting for the last few years (since Rob Arnott’s work) has been by value, which bases the percentage of each holding on value metrics like P/E. There is considerable evidence that this works much better than market cap. But we still have a problem: many tech companies, especially new ones, have no earnings! From reverse engineering the index membership it looks like they are using Price/Sales for weighting. For example: Vasco has a Price/Sales ratio 6.1. Palo Alto has a P/S ratio of 13.5. Vasco has about twice the weighting of Palo Alto because it is about twice as cheap on a Price to Sales basis. This is probably not best way to do it, but it is probably the best available way because market cap is flawed and would miss all the upstarts. Due to lack of earnings value metrics are a non-starter. The weightings appear roughly right per Price/Sales, but I could not get the numbers to work precisely. It is possible they are using an additional weighting factor like Relative Strength. Needless to say, this is all in the spirit of “As the Infosec Industry Turns…” and not financial advice of any kind. This is not a recommendation to buy, sell, or hold any of the issues mentioned. In the meantime remember the fees, and this from Jack Bogle: “Performance comes and goes but cost goes on forever.” HACK SEC filing Share:

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Incite 11/12/2014: Focus

Mike Rothman November 12, 2014 No Comments

Interruption is death for a writer. At least it is for me. I need to get into a flow state, where I’m locked in and banging words out. With my travel schedule and the number of calls I make even when not traveling, finding enough space to get into flow has been challenging. Very challenging. And it gets frustrating. Very frustrating. There is always some shiny object to pay attention to. A press release here. A tweet fight there. Working the agenda for a trip two weeks from now. Or something else that would qualify as ‘work’, but not work. Then achiever’s anxiety kicks in. The blog posts that get pushed back day after day, and the conflicts with projects needing to get started. I have things to do, but they don’t seem to get done. Not the writing stuff anyway. It’s a focus thing. More accurately a lack of focus thing. Most of the time I indulge my need to read NFL stories or do some ‘research’. Or even just to think big thoughts for a little while. But at some point I need to write. That is a big part of the business, and stuff needs to get done. So I am searching for new ways to do that. I shut down email. That helps a bit. I don’t answer the phone and don’t check Twitter. That helps too. Maybe I will try a new writing app that basically shuts down all the other apps. Maybe that will help ease the crush of the overwhelming to-do list. Of course my logical mind knows you just start writing. That I need to stop with the excuses and just write. I know the first draft is going to be crap, especially if it’s not flowing. I know that the inbound emails can wait a few hours. I know my Twitter timeline will be there after the post is live on the site. Yet my logical mind loses, as I just stare at the screen for a few more minutes. Then check email and Twitter. Again. Oy. Then I go into my pipeline tracker and start running numbers for the impact of not writing on my wallet. That helps. Until it doesn’t. We have had a good year, so the monkey brain wonders whether it’s not really a bad idea to just sandbag some of the projects and get 2015 off to a roaring start. But I still need to write. Then at some point, I just write. The excuses fall away. The words start to flow, and even make some sense. I get laser focused on the research that needs to get done, and it gets done. The blog fills up with stuff, and balance is restored to my universe. And I resign myself to just carrying around my iPad when I really need to write, because it’s harder to multi-task on that platform. I’ll get there. It’ll just take a little focus. –Mike Photo credit: “Focus” originally uploaded by Michael Dales The fine folks at the RSA Conference posted the talk Jennifer Minella and I did on mindfulness at the conference this year. You can check it out on YouTube. Take an hour and check it out. Your emails, alerts and Twitter timeline will be there when you get back. Securosis Firestarter Have you checked out our new video podcast? Rich, Adrian, and Mike get into a Google Hangout and.. hang out. We talk a bit about security as well. We try to keep these to 15 minutes or less, and usually fail. October 27 – It’s All in the Cloud October 6 – Hulk Bash September 16 – Apple Pay August 18 – You Can’t Handle the Gartner July 22 – Hacker Summer Camp July 14 – China and Career Advancement June 30 – G Who Shall Not Be Named June 17 – Apple and Privacy May 19 – Wanted Posters and SleepyCon May 12 – Another 3 for 5: McAfee/OSVDB, XP Not Dead, CEO head rolling Heavy Research We are back at work on a variety of blog series, so here is a list of the research currently underway. Remember you can get our Heavy Feed via RSS, with our content in all its unabridged glory. And you can get all our research papers too. Network Security Gateway Evolution Introduction Monitoring the Hybrid Cloud: Evolving to the CloudSOC Emerging SOC Use Cases Introduction Building an Enterprise Application Security Program Recommendations Security Gaps Use Cases Introduction Security and Privacy on the Encrypted Network The Future is Encrypted Newly Published Papers Secure Agile Development Trends in Data Centric Security Leveraging Threat Intelligence in Incident Response/Management The Security Pro’s Guide to Cloud File Storage and Collaboration The 2015 Endpoint and Mobile Security Buyer’s Guide Open Source Development and Application Security Analysis Advanced Endpoint and Server Protection The Future of Security Incite 4 U Master of the Obvious: Cloud Edition: On my way to the re:Invent conference I read the subhead of a FUD-tastic eWeek article: IT Losing the Battle for Security in the Cloud, which is “More than two-thirds of respondents to a Ponemon Institute survey say it’s more difficult to protect sensitive data in the cloud using conventional security practices.” Um. This is news? The cloud is different! So if you want to secure it you need to do so differently. The survey really shows that most folks have no idea what they are talking about, expected in the early adoption phase of any technology. It is not actually necessarily harder to protect resources in the cloud. I just laugh and then cry a bit, as I realize the amount of education required for folks to understand how to do things in the cloud. I guess that is opportunity for guys like us, so I won’t cry too long… – MR Here we go again: There are a half dozen tokenization working groups proposing standards by my count. Each has vagueness baked into its published specification – many intentionally,

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