Middle-East tensions escalated after the U.S. drone strike near the Baghdad international airport last week killed top Iranian commander Qasem Soleimani and increased bets of retaliation from Tehran. While many corners of the investing world were under pressure owing to the sudden spike in geopolitical tensions, a few sectors benefited greatly.
Investors should note that whenever there is a rise in warfare-related risks, aerospace and defence as well as security-related stocks pick up. As a result, along with defence stocks and ETFs, cloud-computing and cybersecurity stocks rallied on Jan 6.
Companies that offer threat-detection services are the ones most likely to benefit from increased risk of attacks compared with those offering more traditional services like firewall defense,” according to Mandeep Singh, a Bloomberg Intelligence analyst.
Salesforce.com Inc. CRM hit an all-time high on worries of an Iranian cyberattack on the United States. Salesforce shares added about 4.4% on Jan 6. CrowdStrike Holdings Inc. CRWD, which provides cloud-delivered endpoint protection, added 8.6% on the day. FireEye Inc.’s ( FEYE Quick Quote FEYE - Free Report) shares gained 2.2% as “the company’s chief executive, Kevin Mandia, has often cited Iran as a major cybersecurity threat against U.S. interests,” as quoted on MarketWatch.
Against this backdrop, we highlight a few technology ETFs that have benefited from the latest geopolitical tensions and are near a 52-week high level.
First Trust Nasdaq Cybersecurity ETF CIBR — Up 1.2% on Jan 6
The underlying Nasdaq CTA Cybersecurity Index tracks the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. The fund charges 60 bps in fees (read:
Cisco's Bleak Guidance Pus These ETFs in Focus). First Trust Cloud Computing ETF SKYY — Up 1.2%
The underlying ISE Cloud Computing Index is a modified market capitalization weighted index designed to track the performance of companies actively involved in the cloud computing industry. The fund charges 60 bps in fees (read:
Cloud Computing ETFs: Reasons to Bet On). iShares North American Tech-Software ETF IGV — Up 1.2%
The underlying S&P North American Expanded Technology Software Index comprises North American equities in the software industry and select North American equities from interactive home entertainment and interactive media and services industries. The fund charges 46 bps in fees.
ISE Cyber Security ETF HACK — Up 1.2%
The underlying Prime Cyber Defense Index utilizes a rules-based investment methodology to select a diverse group of companies actively involved in the cyber security industry. The fund charges 60 bps in fees.
Ark Web X.0 ETF — Up 1.1% ARKW
The ETF is active and does not track a benchmark. Information Technology (43.4%), Consumer Discretionary (26.3%) and Communication Services (17.7%) are the top three sectors of the fund. Cloud Computing & Cyber Security takes about 18.1% of the fund. The fund charges 75 bps in fees.
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