Cybersecurity stocks and exchange traded funds delivered for investors in 2021. It’s not a spectacular showing, but the First Trust Nasdaq Cybersecurity ETF (CIBR) is up 20%.
CIBR, which tracks the Nasdaq CTA Cybersecurity Index, is the original cybersecurity ETF, and, amid a seemingly never-ending spate of cyberattacks on corporate and government entities, the fund doesn’t lack for relevance. That was the case in 2021, and that could suggest more of the same in 2022.
“Cybercrime has been one of the most prominent storylines throughout 2021, with several highly publicized cyberattacks. These were not limited to high-tech industries. They included targets such as a critical oil pipeline in the southeastern U.S., a meatpacking plant in Minnesota, a chain of grocery stores in the U.K., gas stations in Iran, and many others,” according to First Trust research.
The $5.79 billion CIBR turns seven years old next July, so it’s battle-tested across multiple periods of cyber crimes. More important than age is the fact that as the world becomes increasingly digital, need for cybersecurity is rising in exponential fashion. That confirms that the long-term outlook for CIBR and its 35 holdings is compelling.
Adding to the CIBR case is the fact that cybercriminals are taking note and, unfortunately, hauling in cash. In the first six months of 2021, ransomware victims paid $590 million to cyberthieves, according to the Treasury Department. That’s one reason why cybersecurity spending is climbing.
“The Infrastructure Investment and Jobs Act, signed into law in November 2021, allocates nearly $2 billion in additional cybersecurity and related spending, including $1 billion earmarked for state and local governments,” adds First Trust.
While $2 billion is helpful, it barely scratches the surface of required cybersecurity expenditures, and while CIBR components aren’t going to turn away government business, more private entities are realizing that spending now on cybersecurity in advance of attacks is akin to ounce of prevention/pound of cure thinking, which is smart in this case.
Solidifying the long-term outlook for CIBR are disruptive technologies. Whether it’s e-commerce, remote learning, working from home, or others, those endeavors demand bolstered cyber defenses, and companies need to spend to that effect.
“In our view, the ongoing popularity of these trends will likely be accompanied by a heightened demand for cybersecurity solutions. But digital connectivity—supported by cloud computing, 5G mobile networks, the internet-of-things, and many other technological advances—continues to grow more pervasive in nearly all industries,” notes First Trust.
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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.