Familiar Concerns At Check Point

A few things seem to be perpetually true about Check Point Software Technologies (NASDAQ:CHKP). Despite a prominent position in the market, including leading firewall market share, nobody is ever really happy with this Israeli IT security company. The company's growth is no longer in the double digits. The company doesn't spend as much on R&D as Palo Alto (NYSE:PANW) or Fortinet (NASDAQ:FTNT). The company doesn't "play to win," but instead focuses on more or less holding steady in the market. And so on.

I can't and won't dismiss these concerns out of hand - most of them are factually true. It's also true that Fortinet and Palo Alto have blown past Check Point in terms of share price appreciation over the last five years, though CHKP has outperformed (it has gone down less) in the past year as the security stock market has come off a pretty crazy bullish bender.

I really do think this is a case of "it is what it is." What Check Point is today is what it will be tomorrow - a smart, well-run IT security company with a huge installed base, a "fast follower" strategy that mitigates risks and supports margins, and a better-than-credited core technology. With a fair value in the mid-$80s, it's a little undervalued today, but not dramatically so. I think Check Point is a good way to play long-term trends in security spending (which I would think would grow around mid- to high-single digits most years), with opportunities to build/lighten positions as market sentiment ebbs and flows.

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Familiar Concerns At Check Point