Between social media, cloud storage and increased use of mobile devices, like tablets and iPhones, we’re going through a massive transformation: Evermore, we offload our experiences, memories and secrets to constantly evolving forms of technology.

On Tuesday, Apple made an official statement acknowledging that hackers targeted a handful of celebrities and lifted incriminating photos from their personal iCloud systems.

#-ad_banner-#​Not too long ago, the only way someone could take pictures from you would be to physically steal the prints. Nowadays, a hacker half the world away can access your trove of personal data within seconds.

All of this innovation in the way we catalog our lives presents a colossal problem: how does one protect personal information from being stolen by savvy hackers?

On an individual level, there are steps you can take to protect yourself. However, when you scale this problem out to something the size of a company or a government agency, the consequences of massive data theft are an entirely different story.

Rewind to the beginning of August. Russian hackers were reported to have amassed 1.2 billion username and password combinations and over 500 million email addresses — the largest data breach ever discovered.

In November 2013, Target was hacked — 40 million credit card numbers and 70 million addresses and phone numbers were stolen.

A few months after, eBay confirmed that personal data belonging to 145 million of its users was compromised.

Circling back to Tuesday, Apple wasn’t alone with their cyber security breach. Home Depot reported a possible theft of credit card data.

I’d like to think I’ve made my point, but these are just a few select cases. Even more from 2013 are presented in this article from PCmag.com.

Looking forward, experts’ project cyber security spending to nearly double to $123 billion by 2020 from $69 billion last year, according to a report by the World Economic Forum.

With that type of growth in spending, it’s no surprise that the average cost per breach increased 15% since 2013, according to The New York Times . And those with more to lose are paying up significantly. In its latest conference call, JPMorgan Chase & Co.’s CEO estimated that the firm will ramp up cybersecurity spending by 25% year over year in 2014 to $250 million.

So who’s set to benefit?

Three companies, in particular, are undervalued and well positioned to directly benefit from this $70 billion market opportunity, and they’re all trading at a discount with respect to their peers.

I say ‘trading at a discount’ considering two ratios specifically: 

1.    Price-to-book — how much investors are willing to pay for every $1 in book value. This is a good snapshot of how the company is valued strictly based on its financial position. 

2.    Price-to-earnings  — how much one is willing to pay for every $1 of company earnings. This provides a solid measure to compare apples-to-apples of how expensive a company is relative to its peers.

Company	Price	Price to Book Value	Price to Earnings (TTM)
Check Point Software Technologies (Nasdaq: CHKP)	$71.51	3.72	21.52
Zix Corporation (Nasdaq: ZIXI)	$3.78	3.59	21.00
Symantec Corporation (Nasdaq:SYMC)	$24.30	2.87	18.98
Security Software & Services (Industry Average)		9.96	26.70

Check Point Software Technologies Ltd. (Nasdaq: CHKP)

Check Point, a direct competitor with Symantec, is focused on developing cyber security products and services. They’ve proven themselves as an industry leader and are in a great position to snatch up some low hanging fruit to bolster revenue.

They’ve already demonstrated their ability to execute over the last five years. CHKP averaged 11.51% annual revenue growth, while also averaging 15% per year earnings growth. It’s rare that a business can keep revenues growing at a healthy rate while growing earnings even faster. That’s the mark of efficiency.

Along with growing overall revenue, the size of their deals is ramping up significantly. During the most recent quarter, for example, the number of large ticket deals (larger than $1 million) grew by 35% year-over-year — demonstrating the scope of opportunity in the marketplace.

Beyond the strong operating performance, CHKP has a squeaky clean balance sheet — last quarter the company bought back approximately 3 million shares.

Altogether, increasing profitability, share buybacks and revenue growth make this stock a strong buy and a great way to play the cyber security growth.

Zix Corp. (Nasdaq: ZIXI)

Zix Corp. is a small, yet innovative, cyber security company focused on email encryption for highly regulated industries, like healthcare, financial services and tech.

There are a few reasons why Zix gets me excited.

Similar to CHKP, Zix is growing larger ticket orders. As their CEO pointed out on their July earnings call, the sales group handling large accounts posted its best quarter in over three years.

Zix also has shockingly high gross margins, coming in at 84%. This essentially means that for every $1 of revenue, Zix keeps $0.84 after direct costs.  With such a high margin any significant uptick in revenue could trickle down to earnings.

While I’m impressed with their solid financial growth, I believe they have a game-changing partnership that could propel them to the next level.

This May, Zix and Google announced a new product, called GAME.  Zix designed GAME to provide email encryption for the Google Apps infrastructure. It’s tough to quantify the long-term financial opportunity, but Google specifically reaching out to Zix is a massive vote of confidence for the company.

Zix is tiny compared to CHKP and SYMC, but the upside potential as an investor is much greater. It still trades at a discounted valuation of 21.39 times earnings. If you can stomach a little volatility, this stock could have a very bright future ahead.

3) Symantec Corp (Nasdaq: SYMC)

Symantec is one of the largest players in the cybersecurity space.  This firm is a safe way to play the growth in data protection, as my colleague pointed out in a recent article.

As the cybersecurity market flourishes, Symantec recently beat analyst revenue and earnings expectations for the third quarter in a row. The company already has its talons in the major firms – with 99% of all Fortune 1,000 businesses utilizing Symantec products.

Beyond their expansive client base, and strong operating performance Symantec is also rewarding shareholders in multiple ways.

Looking back to 2013 the company shelled out over $418 million in dividends, bought back $500 million worth of stock, and reduced its debt by $1.2 billion.

While SYMC is a more mature company than CHPK, or ZIXI, it should continue to benefit from the growth in cybersecurity. And with the killer combination of debt paydown, buybacks, and dividends, it’s a powerhouse addition to any portfolio.

Risks to consider: Each stock has its own risks, and I’ll always tell you to set a stop loss order in accordance with your risk tolerance. Cyber security spending could slow down, which would negatively impact these companies — although I consider that to be very unlikely.

Action to take–> The growth in data breaches is alarming, yet presents amazing opportunities for those who can provide security. These three companies are industry leaders and are set to benefit from the growth in cybersecurity spending.  They’re trading at cheaper multiples than the industry average and are all buys in my book.

If the changing technology landscape interests you… and you’re looking for ways to profit from the innovation, check out my colleagues 11 Most Shocking Investment Predictions for 2015. His previous predictions have given investors 89%… 92%… 293%… and even 310% gains in a year. To hear our latest, including how a tech giant’s next breakthrough could threaten the entire banking industry in 2015, click here.