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Forget Tech Woes: Buy These Cybersecurity Stocks & ETFs
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Investors must be in two minds about investing in tech after such massive selloffs, but they should note that not all segments were badly hurt in the recent rout. The crash that was caused by reports of Facebook FB data breaches in mid-March, spread like wildfire in Wall Street, and particularly hurt the tech behemoths.
But one tech area that survived the rout to a huge extent was cyber security, and its stocks and ETFs. The broader tech ETF Technology Select Sector SPDR ETF (XLK - Free Report) has lost about 5.5% (as of Apr 3, 2018) since Mar 19. But cyber security product ETFMG Prime Cyber Security ETF (HACK - Free Report) has lost only 1.3% in this time frame.
And why not? The fear of cyberattacks rising rapidly due to data theft or data breaches. Be it the ransomware WannaCry or Petya, one cyber incident after another disrupted global stability in the last few months.
Solid Industry Growth
According to a report published by Zion Market Research, the global cyber security market was worth about USD 105.45 billion in 2015, and is expected to touch USD 181.77 billion in 2021. The market is expected to log a CAGR of 9.5% between 2016 and 2021.
Another market research company MarketsandMarkets projects that the cybersecurity market will witness a CAGR of 11% from USD 137.85 billion in 2017 to USD 231.94 billion by 2022.
Widening Reach
The importance of cyber security has been recognized by several industries, ranging from aerospace and defense, government, banking, financial services and insurance (BFSI), healthcare, retail, IT & telecom, to manufacturing. Large enterprises make up most of the share of the cyber security market compared with SMEs. Demand for cyber security has been picking up more than 5% across all the industries.
North America is expected to occupy the largest share of the cybersecurity market in 2017, due the early implementation of cybersecurity. However, the market in APAC is expected to deploy cyber security at the highest CAGR between 2017 and 2022. Stringent regulations and directives for data privacy in APAC countries, especially India and China, will boost the space.
Upbeat Earnings in the Cards?
Investors should note that 10 out of 12 companies came up with positive earnings surprise in the last quarter, with the magnitude of surprise ranging from 4.64% to 200%. Its Zacks Industry rank is in the top 33%. The Earnings ESP of many companies is also positive -- +7.14% for FireEye Inc. and +0.60% for Fortinet Inc. (FTNT - Free Report) (read: Cyber Security ETFs Scale New Highs on Robust Q4 Earnings).
Below we highlight a few cybersecurity ETF and stock option for a winning portfolio.
The underlying Prime Cyber Defense Index applies a rules-based investment methodology to pick companies actively involved in the cyber security industry. Commvault Systems, Science Applicatns Intl Cp New Com and Palo Alto Networks hold the top three positions of the fund.
First Trust NASDAQ CEA Cybersecurity ETF (CIBR - Free Report)
The underlying Nasdaq CTA Cybersecurity Index tracks the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. Palo Alto Networks, Akamai Technologies and Symantec are the three top holdings of the fund (read: 3 Tech ETFs & Stocks Unscathed by FAANG Shocks).
SPDR Kensho Future Security ETF
The fund looks to track companies whose products and services are driving innovation behind future security which includes the areas of cyber security, advanced border security, and the following areas for military application: robotics, drones and drone technologies, space technology, wearable technologies and virtual or augmented reality activities.
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Forget Tech Woes: Buy These Cybersecurity Stocks & ETFs
Investors must be in two minds about investing in tech after such massive selloffs, but they should note that not all segments were badly hurt in the recent rout. The crash that was caused by reports of Facebook FB data breaches in mid-March, spread like wildfire in Wall Street, and particularly hurt the tech behemoths.
But one tech area that survived the rout to a huge extent was cyber security, and its stocks and ETFs. The broader tech ETF Technology Select Sector SPDR ETF (XLK - Free Report) has lost about 5.5% (as of Apr 3, 2018) since Mar 19. But cyber security product ETFMG Prime Cyber Security ETF (HACK - Free Report) has lost only 1.3% in this time frame.
And why not? The fear of cyberattacks rising rapidly due to data theft or data breaches. Be it the ransomware WannaCry or Petya, one cyber incident after another disrupted global stability in the last few months.
Solid Industry Growth
According to a report published by Zion Market Research, the global cyber security market was worth about USD 105.45 billion in 2015, and is expected to touch USD 181.77 billion in 2021. The market is expected to log a CAGR of 9.5% between 2016 and 2021.
Another market research company MarketsandMarkets projects that the cybersecurity market will witness a CAGR of 11% from USD 137.85 billion in 2017 to USD 231.94 billion by 2022.
Widening Reach
The importance of cyber security has been recognized by several industries, ranging from aerospace and defense, government, banking, financial services and insurance (BFSI), healthcare, retail, IT & telecom, to manufacturing. Large enterprises make up most of the share of the cyber security market compared with SMEs. Demand for cyber security has been picking up more than 5% across all the industries.
North America is expected to occupy the largest share of the cybersecurity market in 2017, due the early implementation of cybersecurity. However, the market in APAC is expected to deploy cyber security at the highest CAGR between 2017 and 2022. Stringent regulations and directives for data privacy in APAC countries, especially India and China, will boost the space.
Upbeat Earnings in the Cards?
Investors should note that 10 out of 12 companies came up with positive earnings surprise in the last quarter, with the magnitude of surprise ranging from 4.64% to 200%. Its Zacks Industry rank is in the top 33%. The Earnings ESP of many companies is also positive -- +7.14% for FireEye Inc. and +0.60% for Fortinet Inc. (FTNT - Free Report) (read: Cyber Security ETFs Scale New Highs on Robust Q4 Earnings).
Below we highlight a few cybersecurity ETF and stock option for a winning portfolio.
Stocks in Focus
Qualys Inc. (QLYS - Free Report)
The Zacks Rank #1 (Strong Buy) company is a provider of cloud security and compliance solutions. It belongs to a top-ranked Zacks industry (top 32%).
Fortinet Inc. (FTNT - Free Report)
The Zacks Rank #2 (Buy) company is a provider of network security appliances.
Imperva Inc.
The Zacks Rank #1 company is engaged in the development of protection software and services for business applications and databases.
ETFs in Focus
ETFMG Prime Cyber Security ETF (HACK - Free Report)
The underlying Prime Cyber Defense Index applies a rules-based investment methodology to pick companies actively involved in the cyber security industry. Commvault Systems, Science Applicatns Intl Cp New Com and Palo Alto Networks hold the top three positions of the fund.
First Trust NASDAQ CEA Cybersecurity ETF (CIBR - Free Report)
The underlying Nasdaq CTA Cybersecurity Index tracks the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. Palo Alto Networks, Akamai Technologies and Symantec are the three top holdings of the fund (read: 3 Tech ETFs & Stocks Unscathed by FAANG Shocks).
SPDR Kensho Future Security ETF
The fund looks to track companies whose products and services are driving innovation behind future security which includes the areas of cyber security, advanced border security, and the following areas for military application: robotics, drones and drone technologies, space technology, wearable technologies and virtual or augmented reality activities.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>