Best Cybersecurity ETFs for Q4 2021

Investing News

The global cybersecurity market is expected to expand at a healthy compound annual growth rate (CAGR) of 10.9% through 2028 as cybercrime and cyberattacks affect more individuals, companies, and governments. Investors seeking to profit from this trend may consider owning a wide spectrum of cybersecurity stocks through exchange-traded funds (ETFs). Betting on individual stocks can be especially risky in young, fast-evolving industries. Cybersecurity ETFs offer diversification across the sector, thus avoiding the risks associated with trying to pick individual winners.

Key Takeaways

  • The cybersecurity industry has underperformed the broader market in the past year.
  • The ETFs with the best 1-year trailing total return are BUG, CIBR, and IHAK.
  • The top holding of BUG and IHAK is Fortinet Inc., and the top holding of CIBR is Cisco Systems Inc.

There are 4 ETFs that trade in the U.S. that are focused on the cybersecurity sector: the Global X Cybersecurity ETF (BUG), the First Trust NASDAQ Cybersecurity ETF (CIBR), the iShares Cybersecurity and Tech ETF (IHAK), and the ETFMG Prime Cyber Security ETF (HACK). The sector, as measured by the S&P Kensho Cyber Security Index, has underperformed the broader market with a total return of 41.6% over the past 12 months compared to the S&P 500’s total return of 50.0%, as of May 6, 2021. The best-performing cybersecurity ETF, based on performance over the past year, is BUG. We examine the top 3 best cybersecurity ETFs below. All numbers below are as of May 9, 2021, except where indicated.

  • Performance over 1-Year: 43.5%
  • Expense Ratio: 0.50%
  • Annual Dividend Yield: 0.51%
  • 3-Month Average Daily Volume: 207,094
  • Assets Under Management: $345.1 million
  • Inception Date: October 25, 2019
  • Issuer: Global X

BUG tracks the Indxx Cybersecurity Index, which gauges the performance of companies that operate within the cybersecurity industry. The ETF invests in companies that are positioned to benefit from increasing adoption of cybersecurity technology, including companies that offer security against intrusion and attacks on systems, networks, applications, computers, and mobile devices. The fund focuses on cybersecurity growth stocks across the market-cap spectrum. As of May 7, 2020, about three quarters of its 27 holdings are based in the U.S., with the remaining quarter spread across Israel, Britain, Japan, and South Korea. Its top three holdings include Fortinet Inc. (FTNT), a provider of enterprise security solutions; Palo Alto Networks, Inc. (PANW), a provider of network security solutions; and class A shares of CrowdStrike Holdings Inc. (CRWD), a holding company whose subsidiaries provide enterprise and other cybersecurity services.

  • Performance over 1-Year: 42.9%
  • Expense Ratio: 0.60%
  • Annual Dividend Yield: 0.21%
  • 3-Month Average Daily Volume: 546,283
  • Assets Under Management: $3.6 billion
  • Inception Date: July 6, 2015
  • Issuer: First Trust

CIBR is a multi-cap growth fund targeting U.S.-listed stocks. The ETF tracks the NASDAQ CTA Cyber Security Index, which is designed to gauge the performance of cybersecurity companies within the technology and industrials sectors. Each of the fund’s holdings, numbering 40 as of May 7, 2020, must be: classified as a cybersecurity company by the Consumer Technology Association, have a minimum market cap of $250 million, and must meet certain liquidity requirements. Its top three holdings include Cisco Systems Inc. (CSCO), the maker of telecommunications and networking hardware and software; class A shares of Accenture Plc (ACN), an Irish-domiciled management and technology consulting services provider; and class A shares of CrowdStrike Holdings.

  • Performance over 1-Year: 35.3%
  • Expense Ratio: 0.47%
  • Annual Dividend Yield: 0.41%
  • 3-Month Average Daily Volume: 124,566
  • Assets Under Management: $457.6 million
  • Inception Date: June 11, 2019
  • Issuer: iShares

IHAK is a multi-cap fund focused on cybersecurity companies. The fund tracks the NYSE FactSet Global Cyber Security Index, which is composed of cybersecurity and technology stocks. The ETF invests in companies engaged in cyber security hardware, software, products, and services. The vast majority of the fund’s holdings are based in the U.S., with the rest based in Israel, Japan, Canada, the U.K., and Taiwan. The fund’s top holdings include Fortinet; Proofpoint Inc. (PFPT), a provider of enterprise security services; and Juniper Networks Inc. (JNPR), an internet infrastructure solutions provider.

The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

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