One of the biggest threats to corporate America is ransomware. The growing possibility of losing access to the essential or confidential digital property is a nightmarish scenario for executives as the financial consequences can be enormous.
But it’s not just major companies that are at risk. We are all threatened with the loss of personal data security as hackers continue to develop new ways to exploit networks, software, and the array of evolving technology services. As the world advances to become more digitized, so too do its threats.
These attacks are among several tailwinds for investors in cybersecurity stocks, says Morningstar senior equity analyst Mark Cash. The “heightened threat environment, networking changes due to the pandemic changing how security works, legislation ramping up fines for miscues, spending becoming proactive and commanding a larger portion of IT budget, and these headline-grabbing breaches all help the demand,” he says.
Cybersecurity is a young, quickly evolving industry, making the job of choosing companies to bet on especially tricky. Today we’ve got a recommendation for anyone looking to benefit from the massive potential in cybersecurity.
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Betting on individual cybersecurity stocks can be especially risky considering the amount of knowledge and expertise needed to understand quick changes and rapidly developing technology. If you’re looking to benefit from this trend, why not consider owning a broad spectrum of cybersecurity stocks through an exchange-traded fund (ETF)?
The First Trust NASDAQ CEA Cybersecurity ETF (CIBR) tracks an index of companies engaged in the cybersecurity segment of the tech and industrial sectors. To make the cut, a company must be classified as a cybersecurity company by the Consumer Technology Association (CTA) and have a minimum market cap of $250 million. This means it holds software and networking companies but also branches out from the tech sector into more diversified industries like aerospace & defense. This slightly expanded focus is the primary distinction between CIBR and similar funds, most of which have small, tech-dominated portfolios.
To ensure liquidity in the underlying stocks, which is a concern for ETFs that invest in small-cap names, companies must have a minimum free float of 20%. The index then weights stocks based on their underlying liquidity and imposes caps on how large any one security can become. The portfolio includes familiar names like Cisco Systems, Akamai, and NortonLifeLock.
First Trust NASDAQ CEA Cybersecurity ETF (CIBR) Summary
- Weighted Average Market Cap $55.52B
- Price / Earnings Ratio 89.02
- Price / Book Ratio 7.99
- YTD Total Return -3.13%
- Yield 0.18%
- Expense Ratio 0.6%
- Net Assets 5.76B
- Number of Holdings 37
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