Should I buy Darktrace shares now they’ve fallen so low?

I’ve thought of buying Darktrace (LSE: DARK) shares for some time now. And thanks to Autonomy, I’ve made up my mind.

It’s all down to news of Mike Lynch, who founded Autonomy. He’s been extradited to the US to face charges related to its sale to Hewlett-Packard in 2011.

Dr Lynch also owns a chunk of Darktrace, but that seems fine to me. The board tells us he plays no part in running it, and that’s all good.

And I don’t suspect anything less than honest accounts at Darktrace. So, there’s no taint from Autonomy claims on that score for me.

Spooky similarities?

But a few things have nagged at me for a while. And it looks to me as if the two firms share quite a few characteristics.

Firstly, Autonomy had a new software approach to a real problem. And I saw a lot of potential in it. Darktrace has a new approach to a real problem too. And I see potential there as well.

Autonomy faced criticism that it promised too much, too early. And critics of Darktrace say it’s done the same.

High tech growth share investors bought into both firms in their early days. And both saw quick booms, which then fell back.

Short sellers

Autonomy attracted short sellers, who thought they saw too much hype. And Darktrace has had its share of short sellers, who… yes, think they see too much hype!

Still, now the shares have shed more than 70% of their peak price, might they be worth a small punt? They’ve picked up a bit in May.

But one key thing holds me back from a buy. I don’t understand what Darktrace does, just as I didn’t understand what Autonomy did. And it seems most of the folk who are drawn to the stock don’t seem to understand either.

We know what it all means in vague terms, sure. But, even though my early life was in software, I know nothing of the techie details.

Key threats

How good is it? What are its key advantages? And above all else, what might overtake it?

I just don’t know. But I see two key threats to software techology in general. One is a lack of barriers to entry.

There’s often no expensive hardware and investment needed. Sometimes, all it can need is a smart person with a computer.

And then, what’s to stop a firm with the resources of, say, Google’s parent Alphabet from using a few billion to try to defeat cybersecurity threats? Might Darktrace then leave no trace?

Warren Buffett

I come down to two of top investor Warren Buffett‘s thoughts. First, don’t buy anything I don’t understand. And I don’t understand this one, at least not well enough.

Then, don’t buy unless I’d be happy to see the market close, and not be able to buy or sell, for 10 years. That could be several company lifetimes in this field. And there’s too much that’s too uncertain for me to commit for 10 years.

I still feel Darktrace might be a good buy. And a part of me still wants some. But I think the Buffett way is best.