Internet Guardians
In this edition of the Smart Investor newsletter, we spotlight a foundational pioneer of modern network cyberdefense. But first, let’s review the latest Smart Portfolio developments.
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Portfolio News and Updates
❖ The year 2025 will surely go down in history as the year when AI became mainstream – and also prone to investor doubts. Still, analysts, strategists, money managers, and industry experts agree that the technology remains in its early stages of development, expecting the AI advance to accelerate and expand. That doesn’t mean that AI-related stocks will only rally from now on, of course. As with the Internet in the years before the dot-com bubble burst, the technology is real and life-changing in every way imaginable – but not every company’s narrative is based on reality.
There are certainly bubbles in some pockets of the AI universe, even if the overall industry’s multiples are not that inflated if adjusted for growth. However, 2025 has shown that markets, with their short-term scope, will question every narrative sooner or later, evaluating it in terms of cold cash in hand. After over two years of enormous investments channeled into the AI buildout, investors began to worry about the timing and the extent of returns on that capex.
However, Wall Street remains convinced that returns will arrive at scale, with many seeing 2026 as the pivot to the AI profit surge. According to FactSet, the consensus estimate calls for S&P 500 firms’ net profit margins to jump to a record of 13.9% in 2026, thanks mainly to the AI-driven efficiencies and pricing power in tech. While these forecasts are lacking in the detail department – particularly, in regard to actual profitability-growth mechanisms – history shows that it doesn’t pay to bet against the ability of U.S. tech giants to grow their profits.
Against this backdrop, Wall Street analysts have presented their top AI picks for the incoming year. According to Bank of America, which forecasts the AI boom to continue getting bigger for a decade, the leaders are Nvidia (well, of course) and Broadcom (AVGO). The bank expects global chip sales to rise by about 30% in 2026, exceeding $1 trillion. Meanwhile, AI data-center systems and infrastructure TAM is slated to expand at a CAGR of nearly 40%, surpassing $1.2 trillion by 2030. With this scale of growth forecasted, analysts dismiss concerns about surging capex as irrelevant, seeing it as a necessity to secure a place in the increasingly competitive race.
Others on the Street share the sentiment. Goldman Sachs analysts also view Broadcom as a critical “picks and shovels” supplier for the AI boom, providing hyperscalers like Alphabet’s (GOOGL) Google with custom AI chips. GOOGL itself appears on most short lists of stocks expected to continue their AI-infused winning run in 2026, with JPMorgan analysts forecasting a further 23% upside after 2025’s 66% gain and BMO Capital listing it as their top pick for 2026. Truist also picked GOOGL as one of its 2026 bets, along with Amazon (AMZN) and several others.
Evercore ISI and JPMorgan are also optimistic regarding Amazon’s prospects in 2026, forecasting 30-50% upside in 2026 – thanks to AWS growth, strong demand for Trainium AI chips, and other factors.
Meanwhile, Wedbush identified Microsoft (MSFT) and CrowdStrike (CRWD) among the top five companies to invest in the AI sector. According to their research, MSFT remains an underestimated leader, with its Azure growth and AI-driven transformation supporting the outlook for strong expansion in 2026. CrowdStrike’s Falcon platform is benefiting from rising AI-linked cybersecurity demand, making the company one of the strongest secondary beneficiaries of the AI revolution.
With the opportunity so large, analysts see potential profits along the whole AI value chain – including memory and hardware makers, infrastructure builders, electronics providers, cooling systems specialists, cyberdefense, software applications, and more. And, of course, the list of AI winners in 2026 continues to include the indispensable global AI foundry TSMC (TSM), responsible for most of the world’s advanced chip production. All in all, Wall Street’s consensus remains clear: despite lingering short-term doubts and continued volatility spikes, the AI revolution’s transformative potential – and the profits it will generate – makes betting on its core enablers a compelling long-term play.
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❖ A little further from the AI spotlight, 2025 was also the year of the large banks. The six largest U.S. lenders – JPMorgan Chase (JPM), Citigroup (C), Morgan Stanley (MS), Bank of America, Wells Fargo, and Goldman Sachs – added more than $600 billion in market value during the year, reaching the combined market cap of $2.37 trillion (for reference – that’s more than the entire economy of Spain or Brazil).
Moreover, this may be only the beginning of the rally, as factors that sparked these gains are still developing. The main tailwind is the policy easing, as regulations are gradually becoming more capital-friendly. The ongoing deregulation efforts under the second Trump admin, including cuts in capital requirements, are set to take their first effect in 2026. The reduction in core capital requirements (CET1) for major U.S. banks alone could free up roughly $140 billion in capital, potentially enabling up to $2.6 trillion in additional lending capacity, according to an analysis by Alvarez & Marsal.
Freed-up capital from deregulation isn’t just for lending; banks are expected to ramp up capital returns. With excess capital buffers (over $250 billion across top banks) and higher leverage allowances, analysts anticipate record buybacks and dividend hikes in 2026, directly boosting EPS and attracting investors to their shares.
If that’s not enough, in 2025, the regulators notably shifted their stance on both cryptocurrencies and alternative investments. Their new pro-business approach has removed prior barriers, enabling banks to expand into these high-growth areas – potentially adding billions in fees, commissions, and market-making incomes, as well as dealmaking revenues.
The Fed’s renewed easing adds another supporting factor. First of all, lower rates are expected to stimulate loan growth – including commercial, consumer, and mortgages – providing another pool for lenders’ revenue acceleration. That tailwind should be particularly meaningful if the U.S. economy grows above trend in 2026, as analysts currently expect. This reduces credit risk, lowers loan loss provisions, and creates a favorable environment for lending and fee income.
Moreover, rate reductions tend to support market buoyancy, benefitting the banks’ trading revenues. Additionally, while lower rates decrease the banks’ net interest income (NII) in the short term – overall, they are a net positive for the biggest, most diversified institutions thanks to boosted non-interest revenue, particularly from investment banking and dealmaking. This brings us back to the AI proliferation, where large financial firms profit from surging debt issuance to finance the buildout, from the “circular investing” deals along the AI value chain, and also from the big-ticket IPOs and acquisitions happening in this sphere.
Another AI-related tailwind is the one induced by the lenders themselves. Beyond financing AI buildout, banks are investing heavily in AI for operational efficiency, led by JPM’s example. JPMorgan Chase has been one of the most aggressive and earliest major adopters of AI and machine learning in banking, starting systematically in the early 2010s. This long head start – focused initially on fraud detection, risk management, and trading optimization – has positioned it as a clear leader in scale, investment, and firm-wide integration. The financial behemoth is already realizing roughly $2 billion in annual savings, and it expects this figure to increase in parallel with its accelerating technology investments. Other large U.S. banks are heavily investing in AI for internal operational efficiency and productivity, mirroring JPMorgan’s approach. For example, Citi reports freeing ~100,000 developer hours weekly, while Morgan Stanley says that AI is boosting document retrieval efficiency by up to 80% and aiding research and wealth management tasks. Overall, AI is a proven multi-year efficiency driver across large banks, though exact ROI varies by institution, and the numbers are “under development.”
Overall, all six largest banks have far outpaced the S&P 500 in 2025, with Citi a clear winner with a gain of over 70%. The other two Smart Portfolio holdings from this cohort – Morgan Stanley and JPMorgan – come in at third and fourth, with 45% and 37%, respectively. Although these winners have nearly exhausted their potential upsides implied by their consensus price targets, we believe that in the New Year, these will be lifted as the strong catalysts mentioned above continue to evolve.
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❖ Some of these tailwinds are highly relevant for other financial holdings in the Smart Investor portfolio. Thus, Bank of New York Mellon, aka BNY Mellon (BK) – one of the eight U.S. Global Systemically Important Banks (G-SIBs) alongside the six largest lenders and State Street – is slated to benefit due to its fee-heavy business model with low reliance on NII or traditional lending.
The regulatory shift on cryptocurrencies is one of the strongest positives for the custodian bank, a leader in institutional crypto custody since 2022. In 2025, BK was selected as the primary reserve custodian for Ripple’s enterprise-grade stablecoin, Ripple USD. It also piloted tokenized deposits on a private blockchain and launched the Dreyfus Stablecoin Reserves Fund for institutional stablecoin liquidity. These advancements position it uniquely as an institutional bridge amid pro-business regulatory easing. This drives high-margin fee revenue from custody, servicing, and tokenized assets, positioning BNY Mellon as a bridge for institutional adoption.
The easing alts regulation is also a strong tailwind, with the bank providing expanded access to support surging institutional and wealth client demand, while generating higher custody/administration fees, data services, and dealmaking revenue. Additionally, as a G-SIB, BNY benefits from the anticipated Basel III reduction in 2026, which should free more capital for buybacks and dividends. Finally, the custodian is aggressively deploying its enterprise AI platform and investing in AI-driven tools. This multi-year tailwind offsets costs and enhances margins, similar to JPMorgan.
Additionally, BK indirectly benefits through the AI surge via custody and servicing of AI-related funds and assets, as well as tokenized infrastructure. Moreover, the ongoing rate cuts support markets, boosting assets under custody and AUM – driving fee income surges – and trading revenues.
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❖ Another Smart Investor holding, Capital One Financial (COF), is also named as one of the beneficiaries of these capital-positive trends. While not a G-SIB, Capital One is one of the top ten U.S. financial institutions, playing an important role in the economy – especially after the Discover merger, which made it one of the top card issuers in the nation.
Capital One stands out as one of the most advanced banks in AI for internal use, often ranked alongside or ahead of larger peers. It has invested heavily since the 2010s in ML and AI, mirroring JPMorgan’s approach – but its tech-forward culture and fully cloud-native stack give it a distinct edge. COF was a pioneer in financials’ cloud migration, and its mindset of “a technology company that does banking” gives it an AI advantage. The bank’s underlying technology infrastructure enables rapid AI integration without legacy constraints, while its “AI factory” approach makes it the fastest and most reliable in launching new AI features. As a result, while many competitors are spending time and money on basic migration, Capital One is pulling way ahead in what it can actually do with AI, enjoying a “capability gap” that continues to expand.
Another strong tailwind for COF comes from Fed rate cuts and related dynamics, including consumer borrowing – benefiting its core credit card and auto loan portfolios. Analysts highlight solid loan growth expectations, reduced credit risk in a resilient economy, and lower provisions. While NII faces short-term pressure, COF’s scale and fee-based income provide offsets, making rate easing a net supportive factor. Broader pro-business deregulation also notably benefits COF, including faster merger approvals and potential Basel III watering-down in 2026. Capital One maintains a strong CET1 ratio, positioning it for enhanced shareholder returns from any freed capital.
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Portfolio Earnings and Dividend Calendar
❖ The Q3 2025 earnings season is over, and Q4 is still a couple of weeks away. Although some Smart Portfolio holdings have different fiscal calendars, no companies are scheduled to report over the next week.
❖ The ex-dividend date for Cisco Systems (CSCO) is January 2, while for JPMorgan Chase (JPM) it is January 6.
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New Buy: Check Point (CHKP)
Check Point Software Technologies Ltd. is a foundational force in global cybersecurity, providing the digital defense layer that protects enterprises, governments, and critical infrastructure from increasingly sophisticated threats. Best known as a pioneer of modern firewall technology, the company has evolved into a comprehensive security platform provider spanning network, cloud, endpoint, and threat intelligence protection. Its solutions are deeply embedded in corporate and public-sector environments, securing data flows across on-premise networks, hybrid architectures, and multi-cloud deployments. As one of the largest pure-play cybersecurity vendors, Check Point operates at the intersection of software, real-time threat research, and large-scale security operations. Often working quietly behind the scenes, the company functions as a core resilience layer of the modern digital economy – preventing disruption, safeguarding trust, and enabling organizations to operate securely in an always-connected world.
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The Long Firewall
Check Point Software Technologies was founded in 1993 in Israel, at a time when enterprise cybersecurity didn’t yet exist as a formal discipline, and the commercial internet was only beginning to scale. The company’s early breakthrough – stateful inspection firewall technology – helped establish the modern perimeter-security model and quickly positioned Check Point as a reference point for protecting corporate networks. Unlike many early competitors, its innovation was software-based, allowing security logic and policy enforcement to evolve independently of proprietary hardware. That software-first architecture became a defining trait rather than a tactical choice.
The company went public in 1996 on the Nasdaq, gaining access to global capital while keeping its research core anchored in Israel’s fast-emerging cybersecurity ecosystem. Through the late 1990s and 2000s, Check Point expanded steadily, layering virtual private networks, intrusion prevention, and centralized security management onto its core firewall franchise. This period was marked less by aggressive deal-making and more by methodical expansion – embedding Check Point deeply into enterprise and government environments as networks grew more complex and threats more persistent. As customer preferences shifted toward turnkey deployments, the company allowed its software to run on partner and branded appliances, expanding reach without abandoning its software-centric philosophy.
Over time, Check Point became known for consistency and reliability rather than reinvention. That conservatism proved durable, but the past five years show a more deliberate evolution. As companies moved to cloud services, software-as-a-service applications, remote work, mobile devices, and third-party integrations, the security perimeter dissolved, with applications, data, and users no longer operating inside an easily guarded corporate network. Anticipating this shift, Check Point evolved beyond classic network firewalls toward zero trust, cloud security, identity awareness, and AI-driven prevention.
The company accelerated its shift from a product-led vendor to a unified platform provider, extending protection beyond networks to users, applications, and data. Acquisitions such as ForceNock and Avanan in 2021 strengthened zero-trust access and email security, directly addressing two of the fastest-growing enterprise attack surfaces. In parallel, cloud security capabilities matured from standalone tools into integrated controls designed for dynamic, multi-cloud environments.
This transformation deepened as automation and artificial intelligence reshaped both offense and defense. The acquisition of Atmosec in 2023 reinforced identity and access visibility across cloud environments, tightening zero-trust enforcement as identities replaced networks as the new perimeter. The addition of Spectral in 2024 expanded CHKP’s reach into developer and AI security, targeting emerging risks tied to exposed code, software supply chains, and generative AI workflows. Together, these capabilities were unified under the Infinity architecture and ThreatCloud AI, allowing intelligence gathered across millions of sensors to feed into prevention in real time.
Throughout this evolution, Check Point has remained disciplined and selective. Rather than chasing growth through aggressive buyouts, it has focused on targeted acquisitions, deep platform integration, and long-term partnerships with leading cloud providers. The company works closely with the ecosystem of hyperscale cloud providers through collaboration agreements, native product integrations, marketplace support, and third-party partnerships that embed its security controls across AWS, Azure, GCP, and hybrid cloud environments, enabling customers to secure distributed workloads at hyperscale.
That discipline reflects a long-standing philosophy – adapt to structural shifts without sacrificing architectural coherence. From its origins as a firewall pioneer to its current role as a global cybersecurity platform leader, CHKP’s history is defined by continuity with purpose, balancing early innovation with measured reinvention to sustain relevance and leadership across decades of technological change.
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Embedded Defense
Check Point operates as a prevention-first cybersecurity platform, built to secure how modern enterprises connect, operate, and increasingly, deploy AI. What began as a firewall company has evolved into a broad, integrated security architecture spanning network, cloud, workspace, identity, and AI-native environments. The unifying idea is simple but demanding: stop attacks before they execute, across every control point where data, users, and applications intersect.
At a product level, network security remains CHKP’s largest functional domain. Firewalls, hybrid-mesh network security,1 and related management software together account for roughly half of total revenue, reflecting the company’s deep installed base in large enterprises and service providers. This foundation matters because it is not a legacy segment being harvested – it is the platform through which most customers expand their security footprint. Check Point’s hybrid-mesh approach allows customers to enforce consistent policy across on-premises infrastructure, cloud networks, and SASE2 deployments without redesigning security from scratch. The other half of the business is spread across cloud security, workspace and email protection, endpoint controls, external risk management, and a growing layer of AI-native security capabilities.
More revealing than the product mix is how Check Point actually makes money. The business is no longer driven by one-off transactions, but by subscriptions and support contracts that span the entire platform. Network security, cloud protection, workspace security, and emerging products are increasingly sold as part of long-term, recurring relationships rather than discrete purchases. What this means in practice is that the company has turned its historic firewall footprint into a durable revenue engine – one where customers don’t just renew, but expand usage over time, embedding Check Point deeper into their security stack instead of cycling in and out with refresh budgets. In effect, this shift makes CHKP increasingly a Security-as-a-Service platform – not because all enforcement runs in the cloud, but because protection, intelligence, updates, and support are delivered and monetized as an ongoing service across the entire stack.
Within that subscription base, growth is increasingly driven by newer product families. Emerging technologies such as Harmony SASE, Harmony Email and Collaboration, and External Risk Management contribute approximately 15% of total revenue today, but are expanding materially faster than the core, with annual recurring revenue growing at over 40%. These products extend CHKP’s reach beyond the network perimeter into users, SaaS applications, and external attack surfaces, while remaining tightly integrated into the same policy and prevention architecture.
Cloud and AI security represent the next leg of growth. Rather than treating AI as a standalone product category, Check Point is embedding security across the full AI lifecycle – from model development and infrastructure, to agent runtime and user interaction. Recent acquisitions and partnerships have expanded capabilities in automated exposure remediation, AI model and agent protection, and infrastructure-level security for AI factories. Collaborations with hyperscale ecosystems, including Microsoft and Nvidia, position Check Point as a control layer that enables AI adoption rather than constraining it.
How CHKP grows is as important as where it grows. The company relies on an open-platform philosophy, integrating with hundreds of third-party tools rather than forcing replacement. This lowers adoption friction, supports gradual consolidation, and allows customers to expand usage inside existing environments. The go-to-market model increasingly emphasizes upsell and cross-sell into a large installed base, complemented by renewed focus on enterprise new-logo acquisition, particularly in the Americas and regulated sectors such as government.
End-market exposure is broadly diversified. Large enterprises and service providers remain the primary customers, with meaningful penetration in financial services, government, healthcare, and technology. No single vertical dominates results, which dampens cyclicality and supports steady growth rather than headline volatility.
Taken together, Check Point is not pursuing hypergrowth at the expense of discipline. Its strategy is to compound relevance – using its network-security foundation, data advantage, and prevention-first architecture to expand into cloud, workspace, and AI security as enterprises evolve. The result is a business designed to grow by becoming harder to replace, not louder to market – a platform built for endurance in a threat landscape that keeps expanding.
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1 – Hybrid-mesh network security is an architecture that applies consistent security policies across on-premises networks, cloud environments, remote users, and SASE, allowing protection to follow users and applications as the traditional network perimeter breaks down.
2 – SASE (Secure Access Service Edge) is a cloud-delivered security model that applies network and access protection at the edge, allowing users and applications to be secured consistently without relying on a centralized corporate network.
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Security Compounded
Check Point’s third quarter of 2025 captured the company at its best – not accelerating in a single burst, but extending a long record of steady, dependable execution. Revenue rose 7% year-over-year to $678 million, landing above both management’s midpoint and analyst expectations. It marked at least the eighth consecutive quarter of revenue outperformance, reinforcing a pattern that has become familiar to long-term followers of the stock. More importantly, the composition of that growth continued to strengthen, driven by subscriptions, billings momentum, and higher-value security services. Emerging technologies – including Harmony SASE, Harmony Email and Collaboration, and External Risk Management – delivered over 40% annual recurring revenue growth, continuing to outpace the core and gradually lifting the company’s growth profile without compromising margins. Regionally, revenue growth was broad-based, led by the Americas at 10% year-over-year, with solid contributions from APAC and steadier expansion in EMEA.
Adjusted EPS came in at $3.94, up 75% year-over-year. Roughly $1.47 of the increase came from a one-time tax benefit tied to prior-period settlements, which inflated the year-over-year comparison. However, even excluding that item, adjusted EPS still exceeded guidance, arriving at about $2.47 versus the expected $2.45. This clean beat extended Check Point’s record of beating analyst EPS expectations every quarter since at least Q2 2021, with the sole exception of Q3 2024, when results came in line. The underlying message was not volatility, but consistency layered with occasional accounting noise.
Profitability remained a defining strength. Gross margin held near 89%, while non-GAAP operating margin reached about 42% – placing it at the top of the cybersecurity industry, rivaled by only a handful of vendors in select quarters. Deferred revenue3 rose 8% year-over-year to $1.89 billion, while remaining performance obligations (RPOs)4 increased 9% to roughly $2.4 billion, supporting visibility into future revenue as subscription billings roll forward. Billings5 trends were particularly notable. Calculated billings grew 20% year-over-year, a sharp acceleration from earlier quarters, with services billings up 21%.
Strong billings momentum and rising RPOs continue to translate into cash generation and balance-sheet strength. Operating cash flow totaled $241 million despite a $66 million one-time tax payment, underscoring the company’s ability to convert earnings into cash even in quarters with transient headwinds. CHKP ended the quarter with approximately $2.8 billion in cash and marketable securities and no debt, underscoring a long-standing emphasis on financial discipline. After the quarter closed, the company added further flexibility by issuing $1.75 billion of zero-coupon convertible notes due 2030. The structure carries no cash interest expense and was positioned by management as optionality – supporting potential share repurchases, mergers and acquisitions, and continued investment in product and technology – while leaving the underlying operating model anchored in recurring cash flow.
Looking ahead, management raised full-year 2025 revenue guidance to a midpoint of $2.725 billion – 15 million above its prior expectations – implying about 6% year-over-year growth. FY 2025 adjusted EPS is now expected to arrive at $11.22-11.32, increasing by 22-24% from 2024. For Q4, Check Point guided to revenue of $724-764 million and adjusted EPS of $2.70-2.80, broadly in line with or slightly above prevailing analyst estimates. Management flagged foreign exchange pressures and acquisition-related costs as near-term margin headwinds. However, both the company and analyst consensus expect strong demand trends – particularly in subscriptions and AI-related security – to continue supporting earnings growth, with the maturing of recent investments adding incremental operating leverage.
Taken together, the financial picture reflects a company compounding quietly rather than chasing spectacle – extending its record of revenue and EPS discipline, building backlog and billings visibility, and reinforcing a model designed to perform steadily across cycles.
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3 – Deferred revenue represents amounts already billed or collected from customers for products or services that have not yet been recognized as revenue, and will be recorded over time as the service is delivered.
4 – RPOs represent total contracted revenue not yet recognized, including both billed and unbilled amounts scheduled for future delivery.
5 – Billings reflect the value of customer contracts invoiced during a period, serving as a near-term indicator of sales activity. Calculated billings adjust reported billings to smooth invoicing timing effects, providing a normalized view of underlying demand.
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Verified Thesis
Check Point’s most relevant peers represent different strategic paths within enterprise cybersecurity rather than a single homogeneous group. Fortinet is the closest like-for-like comparison, sharing CHKP’s firewall heritage, large enterprise customer base, and transition toward a unified security platform. Zscaler reflects the cloud-native and SASE-first model, highlighting how the market prices faster growth and subscription-only architectures relative to profitability and cash generation. CyberArk offers a focused identity-security comparison, useful for framing how investors reward subscription transitions within a narrower but mission-critical domain. Palo Alto Networks, while materially larger, serves as the industry benchmark – the scaled platform leader against which execution, breadth, and long-term valuation gaps are most often judged. Together, these companies frame the valuation and stock-performance landscape in which CHKP’s blend of profitability, discipline, and steady growth is evaluated.
Among this tight peer group, stock performance has diverged sharply this year – with CHKP and Palo Alto posting only modest gains, CyberArk and Zscaler advancing by double digits, and Fortinet down by roughly 15%. This divergence reflects differences in market expectations rather than a clean split in operating performance. The high-growth, low-profitability firms CyberArk and Zscaler benefited from early-year enthusiasm around AI-driven, cloud-native security and identity protection, aligning cleanly with dominant 2025 narratives. Fortinet, by contrast, lagged amid execution challenges in its core hardware business and investor skepticism following a sector refresh cycle.
Meanwhile, Palo Alto and Check Point entered 2025 as “known quantities.” Their profitability, scale, and resilience were already embedded in expectations. As a result, muted performance reflected not disappointment, but hesitation – the market waiting for evidence that these platforms could still surprise on growth, not just defend margins. That confirmation arrived later in the year – particularly for CHKP, which is demonstrating measurable acceleration beneath a stable margin profile. The inflection in billings, the sustained high growth in emerging products, and an improving subscription mix are reshaping the earnings durability story without undermining the discipline investors already trust. That combination is rare – and often precedes delayed re-ratings in high-quality software.
On top of that, Check Point’s stock arrives at the checking point with restrained valuations, shaped by a lingering perception of “steady but slow.” With the setup changing, CHKP no longer has to choose between growth and profitability – yet its multiples still reflect the old narrative. Fortinet illustrates the downside when growth expectations falter even temporarily, CyberArk and Zscaler have already benefited from front-loaded multiple expansion, and Palo Alto must continuously defend its premium valuation. Against this backdrop, Check Point’s positioning at the end of 2025 skews meaningfully toward upside. The market has already validated its downside protection. What remains is upside driven by a shift in perception – from dependable defender to disciplined compounder with renewed growth visibility.
To illustrate this favorable asymmetry, it’s worth noting that CHKP carries materially lower valuation multiples than all peers across trailing and forward GAAP and non-GAAP P/E, Price/Sales, EV/Sales, and EV/EBITDA. The one metric where Check Point screens less favorably is forward PEG. That is not because valuation is stretched, but because growth assumptions remain conservative. The market is still valuing the company as a disciplined incumbent with optional upside, not yet as a reaccelerating platform. If that growth inflection proves durable into 2026 – meaning billings continue to convert into revenue, emerging products scale, and margins remain intact – the adjustment should come through higher expected growth, compressing PEG, rather than through multiple expansion alone.
While Check Point, like most technology firms, does not pay dividends, it prioritizes share repurchases as its primary capital-return mechanism, alongside maintaining balance-sheet flexibility and funding internal and inorganic growth. The company maintains a standing buyback authorization and deploys it opportunistically, scaling activity based on valuation, cash generation, and strategic needs. This has driven a steady reduction in share count over time, materially supporting per-share earnings growth even during periods of modest revenue expansion. Importantly, these repurchases have historically been funded entirely from free cash flow, reinforcing the company’s reputation for financial discipline.
During the first three quarters of 2025, CHKP repurchased approximately $975 million of stock, effectively retiring about 3.5% of the float in just nine months. In December 2025, the company also initiated an additional $225 million accelerated share repurchase as part of a $1.75 billion convertible-note offering, bringing expected full-year repurchases to more than $1.2 billion. Over the past five years, Check Point has retired close to one-quarter of its total shares outstanding, underscoring a long-standing commitment to per-share value creation.
With growth momentum rebuilding inside a model the market already trusts, CHKP no longer needs to change what it is – only how it is perceived. That gap between reality and recognition is what makes the stock compelling heading into 2026.
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Investing Takeaway
Check Point offers investors a rare combination of durability, discipline, and renewed relevance in enterprise cybersecurity. Built on a prevention-first foundation, the company has steadily expanded from network security into cloud, workspace, identity, and AI-native protection without sacrificing architectural coherence or financial rigor. Its platform is increasingly delivered as an ongoing service, embedding CHKP deeper into customer environments as security needs grow more complex. Recent momentum shows that the business can reaccelerate without abandoning the margin strength and cash generation that define its profile. Active share repurchases reinforce per-share compounding, while selective investments and partnerships position the platform for the next phase of enterprise and AI adoption. For investors seeking dependable long-term compounding with improving growth visibility, Check Point presents a compelling investment case that continues to quietly strengthen.
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New Sell: Gen Digital (GEN)
We are stepping aside from Gen Digital at this stage, not due to deterioration in the business, but because the stock’s role in the portfolio has become increasingly passive in a market that is rewarding visibility, narrative traction, and identifiable catalysts.
Operationally, little has changed at Gen since we initiated the position. Execution remains steady, the business is stable, and the company continues to generate strong cash flow from a high-margin, largely recurring revenue base. The transformation from a legacy consumer-security vendor into a more integrated digital safety and financial-wellness platform is real and progressing as planned. From a fundamental perspective, the long-term case remains intact.
The issue is one of attention and momentum, not quality. Outside of quarterly reports, Gen has seen limited news flow and relatively muted analyst engagement. That has left its transformation underappreciated by the broader market, even as consensus upside remains meaningful on paper. In practice, the stock has offered downside protection during volatility, but it has also shown limited responsiveness when risk appetite improves. In an environment where capital is rotating quickly toward names with clearer inflection narratives, that asymmetry matters.
This is not a valuation debate. Gen remains attractively priced, and its multiples still reflect skepticism rooted in past missteps rather than current execution. But valuation alone has not proven sufficient to catalyze a re-rating. Without a near-term trigger to shift sentiment, the stock risks remaining range-bound, tying up capital that could be deployed more productively elsewhere.
Portfolio construction is the decisive factor. We are reallocating toward Check Point, another cybersecurity name that offers strong downside characteristics but with a clearer path to recognition. Check Point combines moderate valuation with low historical volatility and improving growth visibility, while benefiting from broader analyst coverage and more frequent catalysts tied to its platform evolution. At this moment, it complements our flagship cyber holding, CrowdStrike, more effectively than Gen does.
This is not a permanent exit. We continue to view Gen Digital as a credible, cash-generative platform that has rebuilt discipline and strategic focus. We will remain closely engaged and are prepared to re-enter if renewed EPS momentum, strategic developments, or a shift in market attention brings its fundamentals into clearer focus. For now, stepping aside preserves flexibility and aligns the portfolio with opportunities where execution is more likely to translate into price discovery rather than patience alone.
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Smart Investor’s Winners Club
The 30% Winners Club represents stocks from the Smart Investor Portfolio that have risen at least 30% since their purchase dates.
Stocks, particularly tech and AI-adjacent, have been volatile over the past week – but our Club’s ranks remained unchanged, holding 20 stocks: GE, AVGO, ANET, TSM, HWM, APH, EME, ORCL, PH, IBKR, GOOGL, VRT, CRWD, IBM, RTX, MTZ, BK, MS, CSCO, and JPM.
The first contender for the Club’s entry is still Citigroup (C) with a 19.30% gain since we purchased it on October 22. Will it join the Club, or will another stock outrun it to the finish line?
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