In short: BUY — best performer in the universe YTD at +100.1%. ER 10.65%; fwd PE 28.9 vs 42.7 (32.3% under); RDCF 18.3% vs 12.0% (−6.3pp); fair value $168.5 vs $155.83.
In short: Brown's second exhibit in the cyber verdict. "Look at Fortinet, FTNT, and by all means, let's throw up Palo Alto. All three of these stocks have doubled this year. The market has spoken. These are the built in winners. Can you make money in chips? Sure. Can you make money in hyperscalers, power? Yes, absolutely. But we know you cannot bank on any spending not being accompanied by the right amount of cybersecurity." Thomas made the same call on the committee a day earlier.
In short: Named in Wapner's two-word roll call of the software week — "Fortinet down" — between Palo Alto and Adobe. No member commented. It is the same de-crowding that began with Palo Alto's record quarter on Wednesday, still running.
Fortinet sells firewalls, the closest comparison to Palo Alto's core business. It gets two words — "Fortinet down" — and that is the whole content.
It belongs in the table anyway, because the read-through it did not get is the story: the sector leader posted a record quarter and its nearest peer fell with it rather than rising. That is what factor-driven selling looks like from the inside.
In short: The other firewall name in Terranova's list of cybersecurity stocks down with Palo Alto — "it's CrowdStrike, it's Okta, it's Fortinet, it's Datadog" — on full positioning rather than fundamentals. Relevant because Palo Alto's own quarter was a record: the read-through the group did not get is the story.
Fortinet is Palo Alto's closest comparison — both sell firewalls, the equipment and software that police traffic entering a corporate network. When the leader posts a record quarter, the natural expectation is that the read-through lifts the peer. It did the opposite, which is the clearest illustration on the page that the selling was about who already owned these stocks, not about how the businesses are doing.
In short: BUY, and the universe's best performer of the year at +101.4% (21.3% five-year, 36.7% ten-year CAGR). Still rated Buy on the multiple — fwd PE 28.9 against a 42.7 average (32.3% under) — while the reverse DCF strongly dissents: 18.4% growth required against 12.0% expected (−6.4pp), and the expected return is a modest 10.65%.
In short: The surge extends. Q2 revenue +26% Y/Y to $2.05B ($160M beat) and non-GAAP EPS +41% to $0.90 ($0.15 beat); billings +33% to $2.37B, product revenue +52% to $773M, non-GAAP operating margin a Q2-record 38%, free cash flow more than tripled to $966M. Every headline number accelerated from an already-strong Q1, without pull-forward or channel stuffing. The platform bet is paying: the renamed "SASE Firewall" (secure networking + Unified SASE) grew 34% to over $2B, winning against every top SASE competitor, and FortiSASE adoption reached 90% of large enterprise customers, up from 18% a quarter ago. But the mix was lopsided — product +52% versus service revenue +14% to $1.27B, so the beat was front-loaded hardware rather than the recurring stream, and management baked a high-single-digit pricing benefit into second-half billings. FY26 guidance raised across every line: revenue $8.02–8.18B (vs ~$7.81B consensus), billings $9.35–9.55B, non-GAAP EPS $3.41–3.47 (vs ~$3.16), a second straight broad raise. Service revenue is the tell on sustainability. (Recap, not a stance call.)
Fortinet sells network security — traditionally firewall hardware, increasingly a cloud-delivered service called SASE that protects employees wherever they work. Every number accelerated from an already-strong quarter: revenue up 26%, new business signed ("billings") up 33%, cash flow more than tripled, and the striking one — 90% of its large enterprise customers now use its SASE product, up from 18% three months ago. The thing to watch is the mix. Hardware revenue grew 52% while the recurring subscription half grew only 14%. Hardware is lumpy, one-off revenue; subscriptions are the durable kind. So the beat was front-loaded with the less repeatable part, and management has also assumed a price increase will help second-half bookings. Subscription growth is the number that tells you whether this is a genuine platform win. A recap, not a call.
In short: Bought in January at a little over 20× FCF when cybersecurity was lumped in with AI-disrupted software; it doubled in 6 months to >40× FCF (a 6–7yr high), so "yesterday we cut the position in half" — still likes the business long-term, keeps a small stake.
Fortinet is a cybersecurity company. In January its shares were cheap because investors lumped cybersecurity in with software names they feared AI would disrupt, so Oxbow bought at a little over 20× free cash flow (a reasonable price).
Six months later the market flipped and decided cybersecurity is an AI beneficiary (more AI means more security needed), and the stock doubled to over 40× free cash flow — near its highest valuation in 6–7 years. So Finucane cut the position in half: take the quick double, take your original money back off the table, and keep only a small stake. He still likes the business long-term — the sale is about valuation discipline, not a sour view.
28:43And there's actually just as a good example, in January, we bought a position in Fortinet, which is a cybersecurity company. In January, just 6 months ago, cybersecurity stocks were being lumped in with the rest of software stocks as being at risk of AI disruption. And some of these businesses that normally trade at pretty high valuations had fallen to more reasonable entry points.
In short: Named in the cyber comeback (with Palo Alto, CrowdStrike) — up big as the AI-kills-cyber fear reversed. No individual call.
In short: BUY, and the universe's best performer for the second month running — now +100.1% YTD, on a 37.8% ten-year CAGR. FV $168.5 vs $155.8 = only 7.5% under; fwd PE 28.9 against 42.7; RDCF 9.1% vs 12.0%. A Buy that has doubled and is still rated Buy — worth watching as a test of the framework's willingness to downgrade on price.
In short: BUY, and the best performer on the watchlist: +83.7% YTD, 26.2% five-year and 35.4% ten-year CAGR. FV $156.4 vs $144.7 = only 7.5% under after that run; fwd PE 28.9 against 42.7 (32.3% under); RDCF 12.0% required vs 12.0% expected — precisely fair. A Buy held for quality rather than for discount.
In short: Best performer of the month: +59.9% in May — by a wide margin the largest move on either table. No commentary accompanies the performance tables beyond "these stocks did well over the past month". Context: the 23 April write-up had argued the meaningful multiple was 33.6x after stock-based compensation rather than the headline 28.9x.
In short: BUY. EPS growth 12.0%, FWD PE 28.9 against a fair exit 25.0, expected return 10.7%, fair value 93.3 against 86.3 = 7.5% undervalued. Note the model uses the unadjusted 28.9x forward PE, whereas the 23 April write-up insisted on 33.6x after stock-based compensation.
In short: Firewalls as the wedge, subscriptions as the business. Vertical integration gives "a clear cost and performance advantage"; switching means "retraining your team, ripping out systems, and leaving yourself wide open to attacks in the process"; a data flywheel off 800,000+ customers feeding live threat detection; and two new engines — SASE and SecOps at 38% of billings, growing 40% a year, sold to existing customers at almost no incremental cost. Margins guided from 30% to 36% by 2030 on mix shift from hardware to software. Price, on the adjusted basis: 29.2x forward reported, 33.6x after stock-based compensation equal to 15% of net income, target 25x adjusted = $65.7 against $85.1.
Fortinet sells the hardware that guards a company's network — firewalls — and then sells the software subscriptions and support that make the hardware useful. The hardware is the way in; the recurring software revenue is where the profit is.
Once installed, it is very hard to remove. Replacing a security vendor means retraining staff, ripping out equipment, and being exposed to attackers while you do it — a cost no rival can discount away. Meanwhile Fortinet sees live attack data from more than 800,000 customers, so it spots new threats faster, which attracts more customers, which improves the data again.
Two newer products, sold to customers it already has, now make up 38% of new business and are growing 40% a year, which is why profit margins are expected to rise from 30% to 36% by 2030 without needing more revenue.
On price, the same adjustment used on Fair Isaac is applied here. The reported multiple is 29 times next year's profits, but Fortinet pays staff in shares to the tune of 15% of profit; count that properly and the real multiple is 34. The stated buying level is 25 times on the adjusted basis, about $66 against a market price of $85.
In short: BUY — the weakest case on the sheet. The only Buy that is overvalued on both the earnings-growth model (fair value $64.8 against $83.2, −29.2%) and the reverse DCF (−3.4pp: 12.0% required against 8.6% expected), with the lowest expected return at 7.4%. It survives on the multiple screen alone — 28.4x forward against a 42.7x five-year average — and it is one of the few Buys actually up on the year (+6.8%).
In short: Best Buy #4 (a repeat from January). Another significant drawdown, now driven by two things: "Fears of AI disruption in security software" and reports that China has banned foreign security software in certain sectors. "But Fortinet is still an amazing company" — founder-run by the Xie brothers (15% ownership), with cybersecurity essential to every business, so revenue and earnings keep growing. "With the continued decline in its share price, Fortinet is trading at attractive valuation levels."
Fortinet returns from the January list, cheaper. It sells the firewalls and network security that keep attackers out of company systems, and the revenue is high-margin and recurring because nobody cancels their security.
Two new worries have pushed the stock down further: a general fear that AI will disrupt security software, and reports that China has barred foreign security products from certain sectors. Slegers treats the second as a real but bounded geopolitical issue and the first as noise — cybersecurity is a defensive necessity for every business, which is why revenue and earnings keep rising while the price falls. The founders, brothers Ken and Michael Xie, still run the company and own 15% of it.
In short: BUY. 30.6x forward against a 42.7x average (28.3% under), 13.9% EPS growth for a 12.1% expected return, and a $101 fair value against $75.38. Strong compounding history — 20.5% five-year and 30.7% ten-year CAGR. Argued in full three days later in the software special.
In short: Best Buy #4. Cybersecurity for everyone from small businesses to governments; the name is "Fortress" + "Network." Founded in 2000 by brothers Ken Xie (CEO) and Michael Xie (CTO), who still own 15% and avoid publicity and flashy spending — "exactly what you want to see as an investor." Down 18.9% from its all-time high on disappointing summer guidance: "It's just short-term noise if you ask me. As a result, the company is trading at attractive valuation levels."
Fortinet sells cybersecurity — the firewalls and network protection that keep attackers out of a company's systems — to customers ranging from small businesses to governments. The name is a contraction of "fortress" and "network," which is a fair description of the product.
Two things make it a quality candidate. The founders, brothers Ken and Michael Xie, still run it and still own 15% between them, and Slegers notes approvingly that despite being billionaires they avoid publicity and flashy spending. And the revenue is recurring and high-margin, because security is not something a business cancels. The stock is down about 19% from its high after management lowered guidance last summer — which he treats as short-term noise rather than a change in the business, leaving an attractive entry price.
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Verbatim excerpts from the public transcripts (auto-pulled at each mention's timestamp, lightly cleaned). Timestamps link into the video; "source page" opens that commentator's full analysis at this row. Click a mention's header line to expand it (one open at a time). For personal study — not investment advice.