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How to Profit from the Ashley Madison Security Breach

Written By Jeff Siegel

Posted August 20, 2015

ashleyI read this morning that reality TV star and admitted child molester Josh Duggar had two accounts on – the website that helps married folks get a little something on the side.

I can’t say I’m surprised. After all, holier-than-thou types like Duggar tend to be the kind of folks who use their bully pulpits to hide their own ethical shortcomings. But is having an affair really an ethical shortcoming?

I suppose it depends on the individual. But in most parts of the world, its quite common for married couples to seek relationships outside of their marriages. In fact, in many parts of Asia, men who can afford it often have a wife and a mistress, and it’s completely understood as a normal part of life.

I’m not saying it’s right or wrong. That’s a decision for each individual to make. But the fact is, few should be surprised that a site like Ashley Madison has 37 million customers. Bottom line: The company simply tapped into a very profitable opportunity. And while this recent hack has probably destroyed the company, the free market will ensure that the downfall of Ashley Madison will breed new opportunities.

Good for Business

In the United States, adultery tends to be frowned upon. And make no mistake, now that those emails are out in the open for all to see, there are going to be a lot of folks seeking divorce lawyers. Marriage counselors are sure to see a pick up in business, too.

But to be honest, it’s actually kind of shitty.

Whether or not you think adultery is acceptable, the fact is there will now be a lot of folks that have to deal with their personal lives in a very public way. And that’s unfortunate.

The group responsible for the hack put out the following statement …

“It was [Avid Life Media] that failed you and lied to you. Prosecute them and claim damages. Then move on with your life. Learn your lesson and make amends. Embarrassing now, but you’ll get over it.”

The group is right that the company failed its customers. In fact, I suspect any customer of Ashley Madison should have no problem seeking some kind of compensation for the security breach.

Still, I would argue that those who find adultery to be unethical should equally find “outing” broken marriages as unethical, too.

Of course, I’m not writing this today to shame or congratulate anyone.

Truth is, if you’re seeking an affair, that’s your business. But make no mistake, when you put that “business” on the Internet, it becomes public – no matter what promises any company makes.

Internet Privacy?

This idea that anything is secure on the Internet is ludicrous. If the former Secretary of State can have her emails reviewed by the FBI, do you really think you have any chance of keeping your online information secure?

Now I know there will be plenty of cyber security firms looking to profit from this latest breach. And they will be successful.

I’m not saying any of these companies can promise a 100% success rate – or at least deliver on that promise, but the Ashley Madison hack has served as a great reminder that any company with an online presence can’t do business without some kind of cyber security service. So having some exposure to the cyber security space is probably not a bad idea.

Now a lot of cyber security stocks have been crushing it this year, particularly Palo Alto Networks (NYSE: PANW) and Imperva, Inc. (NYSE: IMPV). So while I do believe it’s a good idea to have some exposure to the cyber security space, at this point you really have to try to find a good bargain.

One cyber security stock I really like right now is Rapid7 (NASDAQ: RPD). It just went public last month, and it hasn’t received much attention. Which I like.

Sales are strong, it has a solid product portfolio, and Q1 results showed a 43.6 percent year-on-year increase in billings. This was actually above estimates.

You can pick up shares of RPD right now for less than $25. My price target on RPD is $28, although given the state of the market right now, I wouldn’t be in a rush to pay more than $24.00.