Fortinet

Overview

Fortinet is a leading cybersecurity company specializing in network security appliances and firewalls. Founded in 2000, it provides security solutions including routers, firewalls, and endpoint protection. The company competes directly with Palo Alto Networks in the network security space.

Fundsmith's Investment Thesis

Why They Own It

During the pandemic, Fortinet's sales doubled as people working from home created massive demand for routers to secure home networks. After the pandemic, shares retreated from those highs, and Fundsmith used the weakness to add to their position.

Terry Smith's View

"In the cybersecurity space, they compete with Palo Alto Networks. During COVID, Fortinet's sales were double what they were before. After COVID, the shares came off those highs. We used that to buy Fortinet. Overall, Fortinet was a good investment, but last year was a bit of a down year."

The "Software Will Replace Hardware" Concern

Smith acknowledged the concern causing the share price decline:

"The reason for the decline was people thinking that routers might be replaced by some form of software. But from my conversations with people in the industry, having a physical device with separate software is a fundamental part of cybersecurity, and that looks like it will continue."

Key Points

• Business model: Network security appliances (routers with security software)
• Competition: Palo Alto Networks (fierce competitor in firewalls/routers)
• Cyclical: COVID boosted demand significantly; normalization hurt shares
• Fundsmith view: Physical security devices remain essential despite software trends

Related Concepts

• cybersecurity — The broader industry
• moat — Competitive advantages in network security

Related People

• terry-smith — Fundsmith's CIO who discussed Fortinet at the 2026 AGM