What are "Trust Brokers" and why are they important for investors?

Trust Brokers are companies that provide security, validation, and certification services that other businesses rely on. They include cybersecurity firms, credit rating agencies, and specialized consultancies. These companies are important for investors because their services remain essential regardless of economic conditions, potentially offering stability in a portfolio. As digital threats and complexity increase, demand for trust services tends to grow.

What is cybersecurity and why does it matter for these stocks?

Cybersecurity refers to the practice of protecting systems, networks, and programs from digital attacks. Many companies in this group (like CRWD, PANW, CYBR) specialize in cybersecurity solutions. As cyber threats become more sophisticated and frequent, businesses must invest in protection, creating sustained demand for these services. This non-discretionary nature of cybersecurity spending helps these companies maintain growth even during economic downturns.

What are credit bureaus and how do they make money?

Credit bureaus (like EFX and TRU in this group) are companies that collect and maintain consumer credit information, which they then sell to lenders, landlords, employers, and others who need to evaluate someone's creditworthiness. They make money primarily by selling credit reports, scores, and analytics to businesses, as well as offering credit monitoring services to consumers. Their business model is resilient because credit checks are required for most financial transactions, regardless of economic conditions.

What does "inelastic demand" mean for these companies?

Inelastic demand means that customers will continue to purchase a product or service regardless of price changes or economic conditions. For trust brokers, this is a key strength—businesses can't simply choose to skip cybersecurity or credit checks to save money during tough times. This inelasticity gives these companies significant pricing power and revenue stability, making them potentially attractive investments during market uncertainty.

How does artificial intelligence (AI) affect the trust broker industry?

AI impacts the trust broker industry in two important ways. First, it creates new, sophisticated threats (like deepfakes and advanced cyberattacks) that increase demand for security and verification services. Second, many of these companies are incorporating AI into their own products to detect threats more effectively or process data more efficiently. This dual relationship with AI acts as a growth catalyst for many companies in this group.

15 handpicked stocks

Trust Brokers

In today's uncertain world, these carefully selected companies profit by providing essential security, validation, and certification services. They sell trust itself—a non-discretionary commodity that commands premium pricing and ensures reliable demand regardless of economic conditions.

Han Tan | Market Analyst

Updated 2 days ago | Published at जून 17