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 defines as "the practice of protecting systems, networks, and programs from digital attacks," is an industry with massive growth opportunities. The 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.
1. First Trust NASDAQ Cybersecurity ETF
- 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.
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.
2. iShares Cybersecurity and Tech ETF
- 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.