2 Cybersecurity ETFs Just In Time For Cyber Monday
As online shopping increases ahead of the busy holiday season, cybersecurity is in the spotlight. And warnings are being issued advising consumers to pay attention to cyber attacks. For instance, Cisco (NASDAQ: CSCO ) suggests individuals should have "stronger passwords and apply the 'smell test' to too-good-to-be-true online offers.”
Increased interconnectedness, especially since the start of the pandemic, has also brought a significant uptick in cyber threats. Metrics suggest:
“If it were measured as a country, then cybercrime—which is predicted to inflict damages totalling $6 trillion globally in 2021—would be the world’s third-largest economy after the US and China."
As a result, protecting data, has become crucial for enterprises and consumers. Therefore, today we introduce two cybersecurity exchange-traded funds (ETFs) that could be appropriate for a range of readers.
1. iShares Cybersecurity and Tech ETF
- Current Price: $46.07
- 52-Week Range: $33.78 - $49.09
- Dividend Yield: 0.13%
- Expense Ratio: 0.47% per year
The global cybersecurity market is forecast to grow from about $155 billion in in 2020 to more than $240 billion in 2025, implying a compound annual growth rate (CAGR) of about 11%.
In terms of industries that rely on cybersecurity products and services, the government/defense sector has the biggest slice. Next comes financial services, then manufacturing, as well as the information and communications technology sectors.
The iShares Cybersecurity and Tech ETF (NYSE: IHAK ) invests in global cybersecurity businesses that provide software, hardware, platforms and related services. The fund was first listed in June 2019.
IHAK, which has 41 holdings, tracks the returns of the NYSE FactSet Global Cyber Security Index. The top 10 names make up about 46% of net assets of $722.8 million. In terms of sectors, we see IT (88.85%), followed by industrials (11.03%).
Cloud security platform Zscaler (NASDAQ: ZS ); Palo Alto Networks (NASDAQ: PANW ), known for its firewalls and cloud-based products; Fortinet (NASDAQ: FTNT ), which offers both services and products; Juniper Networks (NYSE: JNPR ), which provides network security products and related software; and Japan-based Trend Micro (OTC: TMICY ) lead the names on the roster.
The ETF is up close to 14.2% this year and 35.5% in the past 12 months. It hit a record high on Nov. 9. Since then, shares in the fund have come under pressure and lost about 6%. The fund’s P/E and P/B ratios stand at 28.87x and 7.56x. Interested readers would find better value around $44.
2. Simplify Volt Cloud and Cybersecurity Disruption ETF
- Current Price: $18.75
- 52-Week Range: $9.55 - $20.97
- Expense Ratio: 0.95% per year
The Simplify Volt Cloud and Cybersecurity Disruption ETF (NYSE: VCLO ) is a thematic investment product managed by Simplify Asset Management, which offers a number of ETFs with options-based strategies.
VCLO concentrates on firms that fund managers believe are among the most disruptive names in the cloud and cybersecurity space. Then, it enhances the exposure with call options on a number of stocks.
In addition to these long positions and call options, the fund also buys mostly out-of-the-money (OTM) put options to potentially protect the fund from a broad market selloff in tech shares.
VCLO started trading in December 2020 and has $20.3 million in assets. Put another way, it is a new and small ETF.
The top 10 stock holdings comprise more than 67% of the fund. Around 19.13% of the ETF is invested in the content delivery network Cloudflare (NYSE: NET ) and another 9.68% is in the SaaS-based data analytics platform Datadog (NASDAQ: DDOG ). These two names are followed by Crowdstrike (NASDAQ: CRWD ), which provides cloud-delivered solutions; data analytics firm Palantir Technologies (NYSE: PLTR ); and Microsoft (NASDAQ: MSFT ).
Year-to-date, VCLO returned more than 53.4%, and hit a record high on Nov. 9. Since then, the fund has lost more than 10%. Those investors who want to have exposure to an ETF that, in part, uses an options strategy might want to research it further.
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