The cover-up is always worse than the crime…

Yahoo! (YHOO) just lost a quarter-million dollars.

It’s not that the stock fell. In fact, it closed 1.4% higher in Wednesday trade.

However, we’re hoping that the company realizes that it just learned a very expensive lesson … one that could (and perhaps should) have been much costlier.

So, what happened?

This story started back in December, when Yahoo! let the public know that over 1 billion accounts had been hacked … three years earlier.

The fallout from this disclosure was swift, and it sent the shares down 6% in just one day.

That’s a big ouch. But is failure to mention this information earlier to Verizon (VZ), which had been planning to pay about $4.8 billion to acquire Yahoo’s web business, gave VZ executives pause. Here was the money quote from Bloomberg back on Dec. 15:

While a Verizon group led by AOL Chief Executive Officer Tim Armstrong is still focused on integration planning to get Yahoo! up and running, another team, walled off from the rest, is reviewing the breach disclosures and the company’s options …

The thing is, this was the second major breach that YHOO disclosed last year.

Back in September, the company said that a 2014 hack affected some 500 million user accounts. December’s announcement saw Yahoo! admit that user data was stolen from more than 1 billion accounts in August 2013.

Verizon, not surprisingly, quickly started exploring its options. The company reportedly wanted to seek a $1 billion markdown on its deal because of said damage … if it even decided to rubber-stamp the deal at all.

So, this week’s news that Verizon is "only" seeking a $250 million discount for Yahoo’s web business is pretty good for YHOO shareholders. Not so much for VZ shareholders, though, as the stock fell 0.4% Wednesday.

Going forward from here, what’s important for Verizon is that it negotiates a separation from any future legal fallout from the Yahoo! breaches.

Toward that end, Verizon is seeking to have Yahoo! assume any lasting responsibility for the hack damage. After all, it only took a few hours after Yahoo’s last breach disclosure for one Yahoo! user to file a class-action lawsuit. The lawsuit alleged:

"Yahoo failed, and continues to fail, to provide adequate protection of its users’ personal and confidential information … Yahoo users’ personal and private information has been repeatedly compromised and remains vulnerable.”

This is a textbook example of the lesson every politician and businessperson should have learned from Watergate: The cover-up is always worse than the crime.

Unfortunately, lessons learned aren’t always lessons practiced.

One lesson you can take away from all this …

Whether or not you have a Yahoo! account that’s been compromised, this is a good reminder that these kinds of data breaches are something we all must be on guard against … at all times.

The reason why is because our entire cyber lives are at risk from both hacktivists and common cyber criminals.

Our social media accounts, email accounts, bank accounts, computer files and even our very identities are subject to hacks. On top of that, if you own a computer and a smartphone or other digital device, your hardware and software are also at risk.

And security threats at the federal level are no secret. Hacks have jumped 1,300% over the past 10 years, according to recent GAO data. And there may be more that have gone undetected or unreported at this time.

As investors, we can take advantage of the need to combat this threat by looking at the best companies, and the best stocks, in the cyber-security space.

One name we’ve been following is the PureFunds ISE Cyber Security ETF (HACK). Launched in 2014, this ETF gives investors a cyber-security vehicle that reduces company-specific risk. (There are more than 200 publicly traded companies with business lines related to cyber security.) It also provides diversification across a typically volatile industry.

HACK won several awards last year, including ETF Newcomer of the Year (Fund Action ETF Performance Awards 2016), Best Specialist ETF (Fund Action ETF Performance Awards 2016) and ETF Innovative Product of the Year (Fund Action ETF Performance Awards 2016).

Those kinds of accolades aren’t surprising. HACK offers a clear-cut, optimal way to profit from the growing demand for cyber security … demand that, like its chart (above), only seems to have room to grow.

Happy trading,
The Uncommon Wisdom Daily Team

P.S. For another winning ETF idea, Grant Wasylik just revealed the 10 funds that were up for People’s Choice: The Best New ETF of 2016 at this year’s "Inside ETFs" conference … and which one the crowd named as its collective favorite. Here’s a hint: Like HACK, "SHE" has a lot to offer potential investors right now.