2 Cybersecurity ETFs With Growth Potential As Technology Use Accelerates
Investing.com | Dec 03, 2020 09:43
Demand for cybersecurity products is surging as the pandemic increases the global reliance on technology.
In the stay-at-home environment, people are increasing their online presence to maintain personal and professional relations. At the same time "cybercriminals have taken advantage of this situation, targeting in particular e-commerce and e-payment businesses, as well as the healthcare system," according to The European Union Agency for Cybersecurity.
Cybersecurity, which Cisco market "was valued at $149.67 billion in 2019 and is projected to reach $304.91 billion by 2027, growing at a CAGR of 9.4% from 2020 to 2027."
In a previous post we introduced}} the ETFMG Prime Cyber Security ETF (NYSE:HACK) and yesterday we considered a few {{art-200546552||cybersecurity stocks. Today’s article extends the discussion to focus on two other exchange-traded funds (ETFs) for those looking to invest in a basket of cybersecurity firms.
h2 1. First Trust NASDAQ Cybersecurity ETF /h2- Current price: $38.22
- 52-Week range: $20.87 - $38.88
- Dividend yield: 1.32%
- Expense ratio: 0.60%
First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR), which started trading in July 2015, has 40 holdings and almost $2.5 billion under management.
Close to half of the funds are concentrated in the top ten names. CrowdStrike (NASDAQ:CRWD), which provides solutions to protect against cyberattacks in cloud environments, Identity-as-a-Service (IDaaS) platform Okta (NASDAQ:OKTA), cloud security platform Zscaler (NASDAQ:ZS), cloud security platform Accenture (NYSE:ACN), which offers management and technology consulting services, networking giant Cisco (NASDAQ:CSCO) and content delivery network Cloudflare (NYSE:NET) are among the leading names in CIBR.
Year-to-date, the fund is up over 28% and hit a record high of $38.88 on Dec. 1. CIBR’s P/B and P/S ratios are 6.76 and 3.56, respectively. In the coming days, short-term profit-taking may put pressure on businesses in the ETF, which could create a better entry point for long-term investors, possibly around $36. We can expect these companies to see robust revenues in future quarters as well.
Finally, CIBR tracks the Nasdaq CTA Cybersecurity Index. CTA, the Consumer Technology Association , represents the consumer technology industry in the US. It has around 2,000 corporate members.
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Members include names like biopharma giant Abbott Laboratories (NYSE:ABT), software group Adobe (NASDAQ:ADBE), known for its multimedia and creativity products, Apple (NASDAQ:AAPL), consumer products company Colgate-Palmolive (NYSE:CL), pay-TV and broadband services provider Dish Network (NASDAQ:DISH), online travel platform Expedia Group (NASDAQ:EXPE), carmaker General Motors (NYSE:GM), health insurance provider Humana (NYSE:HUM), and global financial services group JPMorgan Chase (NYSE:JPM), among others.
This list reminds us of the range of industries and businesses that need cybersecurity services today and in the future.
h2 2. iShares Cybersecurity and Tech ETF /h2- Current price: $34.33
- 52-Week range: $20.36-36.36
- Dividend yield: 0.64%
- Expense ratio: 0.47%
The iShares Cybersecurity and Tech ETF (NYSE:IHAK) provides exposure to global businesses in the cybersecurity sector. The fund started trading in June 2019 and has over $167 million under management.
IHAK, which has 41 Holdings, tracks the NYSE FactSet Global Cyber Security Index. The top names comprise about 48% of the fund. 82.70% of the businesses are US-based, followed by Israel (6.95%), Japan (3.98%), and UK (3.42).
Crowdstrike, eSignature company DocuSign (NASDAQ:DOCU), Zscaler, Okta, security product provider Palo Alto Networks (NYSE:PANW), management and technology consultant Booz Allen Hamilton (NYSE:BAH), cybersecurity solutions Check Point Software Technologies (NASDAQ:CHKP) as well as cybersecurity group Akamai Technologies (NASDAQ:AKAM) lead the names in the ETF.
So far in the year, IHAK rose over 29% and saw an all-time high of $36.36 in early September.
Trailing P/E and P/B ratios are 19.65 and 6.01. Any potential down move toward $32.5 or even below would improve the risk/return profile. Like CIBR, IHAK is likely to reach new highs in the coming quarters. We would look to buy the dips.
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