The technology sector is soaring this year with significant contributions from semiconductors and cloud computing equities. Cybersecurity assets, including the First Trust NASDAQ Cybersecurity ETF (NYSEArca: CIBR), are delivering for investors, too, and should not be lost in the thematic technology shuffle.
CIBR seeks investment results that generally correspond to the price and yield f an equity index known as the Nasdaq CTA Cybersecurity IndexSM, which is comprised of securities of companies classified as “cybersecurity” companies by the CTA.
“The size of the global cybersecurity market is expected to hit $326.4 billion by 2027, registering a compound annual growth rate of 10.0% from 2000 through 2027, according to Grand View Research, an India and U.S. based market research and consulting company,” notes First Trust. “Year-to-date through 7/30/20, the Nasdaq CTA Cybersecurity Index posted a total return of 21.17%, compared to 18.44% for the S&P 500 Information Technology Index and 1.59% for the S&P 500 Index, according to Bloomberg.”
The CIBR Call
In the age of digital communications, an increasing number of professionals are growing concerned about potential digital threats, bolstering demand for cybersecurity. Investors can also capitalize on this growing industry through sector-specific ETF plays.
CIBR turned five years old last month and has $2.11 billion in assets under management. None of its 43 holdings exceed weights of 7%.
Cybersecurity sector-related ETFs have benefited from the shift to working at home as more organizations see the benefit of increasing investments in cybersecurity solutions.
The industry is expected to capitalize on the increased spending for cybersecurity as more companies adjust to working remotely. According to a LearnBonds.com report, 70% of organizations see the value of raising investments in cybersecurity solutions, and around 55% of major organizations will bolster their investments in automation solutions, Security Magazine reports.
CIBR has utility as a long-term play for tactical investors because the number of cyberattacks is rising while corporations and governments are devoting more capital to guarding against these intrusions.
“The impact of cyberattacks has grabbed the attention of the White House, as President Trump has deemed cybercrime one of the biggest issues facing national security. In addition, the President’s 2020 Budget is proposing to allocate $17.4 billion in spending to fund critical initiatives and research in the cybersecurity space, a 5% increase from the 2019 budget,” according to Nasdaq Global Indexes.
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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.