Cybersecurity investing is back in the spotlight in significant fashion, reminding investors that this segment provides credible industry-level and thematic exposure.
For investors that don’t want to stock pick in this group, exchange traded funds, such as the First Trust Nasdaq Cybersecurity ETF (CIBR), are worthy considerations. CIBR, which tracks the Nasdaq CTA Cybersecurity Index, more than doubled in price over the past three years and provides easy access to a deep bench of cybersecurity stocks — 36, to be precise.
That’s impressive, but past performance isn’t a promise of future returns. However, an array of cyberattacks indicate that CIBR has a compelling long-term trajectory. Consider the impact that cybercrimes have on consumers and small businesses.
“According to the FBI’s 2020 Internet Crime Report, the Bureau’s Internet Crime Complaint Center received a record number of complaints from the American public in 2020, totaling more than 791,000, with reported losses exceeding $4.1 billion,” according to Nasdaq research.
While $4.1 billion is a large number, it barely scratches the surface of the costs victims — companies, governments, and individuals — incur when dealing with cybercrimes, and it barely accounts for what companies and governments are spending to bolster cyber defenses. It’s that spending cycle — one with years ahead of it — that highlights opportunity with CIBR.
“Considering how costly cyberattacks are, companies are taking these threats seriously, with a majority of Chief Information Officers prioritizing cybersecurity spending for this year. According to research firm Gartner, cybersecurity was the top priority for new spending, with 61% of the more than 2,000 CIOs surveyed increasing investment in cyber/information security in 2021,” adds Nasdaq.
CIBR, which is the oldest and largest member of the cybersecurity exchange traded funds space, offers other points of allure, including the fact that cybersecurity serves as a key backbone for a variety of other innovative technologies that are not only investable, but relevant to people’s daily lives as well.
“As companies allocate resources to combat these threats, the global cybersecurity market swelled to $153 billion in 2020, according to an industry report by Fortune Business Insights,” notes Nasdaq. “Driven by the increasing use of e-commerce platforms and artificial intelligence, the cloud and, more broadly, the internet of things, the market shows no signs of slowing growth. In fact, the market is projected to grow from $165 billion in 2021 to $366 billion in 2028 at a compound annual growth rate of 12.0%.”
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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.