Motley Fool: Securing the digital domain

With a recent market value topping $48 billion, Palo Alto Networks (Nasdaq: PANW) is one of the world’s top cybersecurity specialists. The company has invested heavily in building a multiplatform strategy to help its customers consolidate and simplify their security systems. Its future looks promising as more and more business processes and data are moving online while threats from cybercriminals and hackers are increasing.

Indeed, Palo Alto Networks’ management expects revenue to grow by more than 20% this fiscal year, led by a projected 40% to 43% jump in annual recurring revenue from its “next-gen security” business. Its increasing scale should drive faster earnings growth while enabling the company to produce more free cash flow. That, in turn, can fund continued investments in innovation and strategic acquisitions to bolster its capabilities.

The company has been signing an increasing number of major deals with customers to consolidate their network security architecture with Palo Alto Networks’ solutions. That’s boosting the number of customers that supply it with more than $1 million of revenue.

Palo Alto Networks should be able to grow its revenue and earnings at above-average rates for years to come, which should power strong returns for long-term investors. (The Motley Fool owns shares of and has recommended Palo Alto Networks.)

Ask the Fool

Q. When a company is bought by another company, does its stock price always go up? – P.Y., Carson City, Nevada

A. Not necessarily. Imagine that the acquiree has a stock price of $50 and a market value of $5 billion. If it’s announced that it’s being purchased for, say, $6 billion (equivalent to $60 per share), the stock price will generally rise to around $60 on the news. It’s common for a company to be bought for more than its market value, perhaps because the purchaser sees value in factors such as its proprietary technology, patents or growth potential. It might also be bought at a premium due to a bidding war.

Other times, a company may be struggling, and it may end up being bought at close to its current market price.

The acquirer’s stock price might jump, too, if investors see the purchase as strategically smart. If investors think the company is overpaying, its stock might sink a bit. It all depends on investor expectations and reactions to the deal. Some acquisitions turn out to be brilliant moves while others end up regretted.

Q. How can I track my portfolio online? – C.A., Hickory, North Carolina

A. Your brokerage will probably offer portfolio tracking. Otherwise, many sites, such as Finance.Yahoo.com, do so. You might click something like a “create portfolio” link, then enter the various stocks and funds you own and the prices at which you bought them. After that, you can click in any time to see the latest value of each holding as well as your overall portfolio’s value. To help you keep up with stocks on your watch list, you might create a separate portfolio for those as well.

My dumbest investment

My worst investing move happened more than 15 years ago. I had 200 shares of Apple that I’d bought at a split-adjusted price of about $2 each. I sold them all for a gain of around $1,000 and was very happy. I then bought shares of a health care company with the proceeds. In a year or two, I lost all my money when that company went bankrupt. Whenever I look at Apple stock now, I feel the pain. – B., online

The Fool responds: Apple has been such a phenomenal stock that it’s the source of myriad investors’ regrets. It has averaged annual gains of more than 31% over the past 25 years – enough to turn a $1,000 investment into nearly $980,000! For context, the S&P 500’s average annual gain during that period is 6.6% or 7.7%, depending on whether you reinvested your dividends in more shares.

Thousands of investors regret never investing in Apple while others, like you, regret selling too soon. At least you did net $1,000 – and it’s worth remembering that it made you happy.

But now you probably really appreciate how powerful it can be to just hang on to a strong performer for many, many years – as long as it remains healthy and you retain confidence in its growth prospects.

And remember that even the most successful investors make costly mistakes sometimes.