How CrowdStrike became a stock market darling

My new conversation with CrowdStrike CEO George Kurtz

In 2023, CrowdStrike’s stock price was up about 150%. It was the third best performing stock in the Nasdaq 100 (behind only Nvidia and Meta this year) and the thirteenth best performer in the entire Russell 1000.

It’s part of a new wave of technology giants on the rise - the market cap of $65 billion or so leaves it far less widely held than the Magnificent 7, but it’s too large for me to claim that it’s been undiscovered. It is currently the second largest pure-play security software name (after Palo Alto, worth almost $100 billion).

Here’s CrowdStrike’s year-to-date total return vs the Nasdaq 100 ETF (QQQ) as a reference point for how explosive this stock has been…

Full disclosure, I am a long-term shareholder in CrowdStrike and have been since 2020.

I began talking about the name on television as my favorite way to play what I viewed as one of the few guaranteed secular bull markets of the 2020’s decade ahead of us - cybersecurity. You can talk as much about cloud and mobile and social and machine learning and distributed computing and generative AI as you’d like, if you can’t secure your data and provide safe access to users, you have nothing. Literally.

You might actually have less than nothing considering the financial (and now regulatory) risk that comes along with a breach. Two weeks ago, a new SEC rule went into effect that makes the reporting of “material” breaches mandatory within four business days for all publicly traded companies. In addition, companies must file an annual review detailing how they’re managing their cybersecurity efforts. Spending on top of the line security solutions has now been enshrined into securities law, in addition to all the other reasons to take this stuff seriously - such as not getting sued into the stone age by your customers or forced to make Bitcoin ransom payments to international cyber terrorists.

Spending on cybersecurity this year amounted to something like $180 billion. According to McKinsey & Co, this number could grow to $2 trillion annually as the threats get larger and corporate and government dollars get allocated accordingly. That’s a 10x for the industry. Cybersecurity spending is also probably the most economically bulletproof considering the cost of non-compliance with industry norms and standards. As a business manager, you would cut IT spending on literally anything else first. A small handful of publicly traded companies have what I consider to be a massive runway ahead of them. CrowdStrike is aiming to become the Salesforce of the industry.

“We’ve seen an inflection point from security being in the backroom to now the boardroom.”

George Kurtz, CrowdStrike CEO

So I became an investor and this year’s share price rally was one for the ages. For the inside story about how the company is thinking about the current environment and why their machine learning and generative AI technology have captured Wall Street’s attention, I went right to the source. I am proud to share this brand new interview we did with co-founder, president and CEO of CrowdStrike, George Kurtz.

You can play it now on all podcast platforms (see below). Later today the YouTube episode will hit our channel, which you can subscribe to here to get the alert.

Reminder: Nothing you read here should ever be considered investment advice directed at you. Please visit this terms and conditions page for our standard disclaimer.

Batnick Begins

I also wanted to make sure you saw the newest video posted to Jill Schlesinger’s Jill On Money playlist on The Compound. Michael Batnick is her guest this week and they do the whole origin story - from f***ing up in college to slinging life insurance policies to discovering The Intelligent Investor to meeting Josh (that’s me) - this is quite a tale and Jill is one of the most skillful interviewers you’ve ever seen in action. I promise you will love this and you might even grow to love Michael more than you already do.

In this business, you don’t come across people as willing to admit their own shortcomings and insecurities as readily as this kid does. I’ve been on The Street for 25 years, you can take my word for it. This isn’t self-deprecation as a sales tactic. It would never occur to Michael how endearment could be his angle amidst a sea of guys who walk around in suits of armor. It’s just who he is. No pretension whatsoever. You like him? Great. You don’t like him, he’s fine with that too. Watch the conversation below to understand the back story:

Thanks so much for checking out our shows. I wish you a beautiful new year and a great start to 2024. And remember, I’ll be there for you all the way through.

Talk soon - Josh