Cybersecurity stocks and exchange traded funds are struggling this year, with growth stocks out of favor and rising Treasury yields pressuring the tech sector.
Gloomy as the near-term feels, buying opportunities with cybersecurity assets, such as the WisdomTree Cybersecurity Fund (NASDAQ: WCBR) could be afoot because the industry remains fundamentally sturdy. In fact, the coronavirus pandemic sped along cloud computing adoption while confirming the necessity of cybersecurity.
“Buoyed by tailwinds from the pandemic and remote work, cloud adoption is on the rise, and enterprise cloud migrations are expanding from fringe applications and experiments to business-critical initiatives,” said Bob Blakely, Team8 operating partner, in a recent note. “As such, security capabilities are evolving to allow enterprises to reap the benefits of moving to the cloud while retaining control over their security posture, data protection programs and application integrity.”
Team8 is WisdomTree’s partner on WCBR’s underlying index – the WisdomTree Team8 Cybersecurity Index.
Cloud Adoption Bodes Wells for ‘WCBR’
“2020 will go down as a pivotal year for cloud adoption as businesses sought to cut costs, retain flexibility and throttle demand due to dislocation caused by the pandemic. In fact, cloud security is the number one investment area for 2021, according to the Team8 2021 CISO Survey, followed by security automation and identity and access management,” adds Blakely.
Among the business-to-business shifts sped along by the pandemic, rising cloud adoption is a vital driver for cybersecurity companies, because the firms serve as guardians of data. Additionally, changes in how and where staffers work is likely to be another, longer-ranging avenue for WCBR upside.
“For example, workloads moving between different cloud environments to optimize for speed, scalability, cost and compliance have created a new ‘shared responsibility’ model between the enterprise and its different cloud providers,” adds Blakely. “If not managed properly, this model could open the door for threat actors to identify and leverage misconfigurations as a way to gain access.”
Technology is rapidly evolving, but so are cyber criminals’ capabilities.
“When moving to the cloud, many enterprises lose the visibility, understanding and control they had when their infrastructure was on-premise. This is a new playground for attackers, especially since they have plenty of opportunities for target practice on cloud networks,” concludes Blakely.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.