Investing in cybersecurity ETFs is a strategic move, given the sector's rapid growth amid rising data breach costs and the expanding influence of cloud computing and IoT. To that end, investors looking for comprehensive protection might consider strong cybersecurity ETFs: iShares Cybersecurity and Tech ETF (IHAK), Amplify Cybersecurity ETF (HACK), and First Trust NASDAQ Cybersecurity ETF (CIBR).
As the need for data protection becomes increasingly critical in today’s digital era, investing in cybersecurity ETFs offers a strategic approach to capitalizing on this demand. These ETFs provide diversified exposure to leading companies in the cybersecurity sector, simplifying investment and reducing the risk associated with relying on the performance of individual stocks.
The global cybersecurity market is expected to grow from $193.73 billion in 2024 to $562.72 billion by 2032, with a 14.3% CAGR. This growth is driven by cloud adoption, IoT proliferation, and advanced threats like ransomware and deepfakes. Additionally, with critical demand in manufacturing, banking, financial services, insurance, and healthcare, the future holds promising investment opportunities in cybersecurity.
Given this favorable backdrop, let’s evaluate the three Technology Equities ETFs picks, starting with number three.
ETF #3: iShares Cybersecurity and Tech ETF (IHAK)
IHAK is an exchange-traded fund launched by BlackRock, Inc. It is managed by BlackRock Fund Advisors and invests in public equity markets worldwide. The fund focuses on stocks of companies operating in information technology and cybersecurity, including hardware, software, products, and services. It invests in both growth and value stocks across diversified market capitalizations and seeks to track the performance of the NYSE FactSet Global Cyber Security Index using a representative sampling technique.
With $870.60 million in assets under management (AUM), IHAK’s top holding is SentinelOne, Inc. (S) with a 5.04% weighting, followed by Varonis Systems, Inc. (VRNS), with a 4.95% weighting, and Fortinet, Inc. (FTNT), with 4.63%. It has a total of 35 holdings.
It has an expense ratio of 0.47%, lower than the category average of 0.58%. It currently has a NAV of $47.72. IHAK’s fund inflows came in at $128.16 million over the past year.
IHAK has gained 27.7% over the past year and 20.7% over the past nine months to close the last trading session at $47.73.
IHAK’s POWR Ratings reflect this promising outlook. The IHAK’s overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
IHAK has an A grade for Buy & Hold, Peer, and Trade. Of the 119 ETFs in the Technology Equities ETFs group, it is ranked #7. Click here to access all of IHAK’s POWR Ratings.
ETF #2: Amplify Cybersecurity ETF (HACK)
HACK is an exchange-traded fund launched and managed by Amplify Investments LLC and co-managed by Tidal Investments LLC. It invests in public equity markets worldwide, focusing on stocks of companies operating in the cybersecurity sector. The fund targets both growth and value stocks across diversified market capitalizations and seeks to track the performance of the Nasdaq ISE Cyber Security Select Index using a full replication technique.
With $1.73 billion in AUM, the fund has a total of 25 holdings. HACK’s top holding is Broadcom Inc. (AVGO) with a 10.25% weighting, followed by Palo Alto Networks, Inc. (PANW) with a 6.59% weighting, and Cisco Systems, Inc. (CSCO) with 6.45%.
HACK has an expense ratio of 0.60%, higher than the category average of 0.58%. It currently has a NAV of $66.32. Its fund outflows came in at $6.43 million over the past month.
The fund’s annual dividend of $0.12 yields 0.18% on the current share price. Its four-year average yield is 0.36%. Its dividend payouts have increased at a CAGR of 26% over the past three years and 19.3% over the past five years.
HACK has gained 22.5% over the past nine months and 32.4% over the past year to close the last trading session at $66.28.
HACK’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Buy & Hold, Peer, and Trade. It is ranked #5 in the same group. To access all the POWR Ratings for HACK, click here.
ETF #1: First Trust NASDAQ Cybersecurity ETF (CIBR)
CIBR is an exchange-traded fund launched and managed by First Trust Advisors LP. It invests in public equity markets worldwide, focusing on stocks of companies operating in information technology, software and services, and technology hardware and equipment sectors. The fund targets both growth and value stocks across diversified market capitalizations and seeks to track the performance of the NASDAQ CTA Cybersecurity Index using a full replication technique.
With $6.64 billion in assets under management (AUM), CIBR’s top holding is Infosys Limited Sponsored ADR (INFY) with a 9.40% weighting, followed by AVGO, with a 9.02% weighting, and PANW, with 8.40%. CIBR has a total of 31 holdings.
CIBR has an expense ratio of 0.59%, higher than the category average of 0.58%. It currently has a NAV of $57.85. Its fund inflows came in at $384.01 million over the past year.
The ETF pays an annual dividend of $0.26, which yields 0.4% on the current price. It has a four-year average dividend yield of 0.55%. Its dividend payouts have increased at a CAGR of 41.7% over the past three years and 35.6% over the past five years.
CIBR has gained 29.9% over the past year and 22% over the past nine months to close the last trading session at $57.83.
CIBR’s POWR Ratings reflect its promising prospects. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system.
CIBR has an A grade for Buy & Hold, Peer, and Trade. In the Technology Equities ETFs group, it is ranked first. Click here to access all of CIBR’s POWR Ratings.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
CIBR shares were trading at $58.41 per share on Monday afternoon, up $0.58 (+1.00%). Year-to-date, CIBR has gained 8.66%, versus a 18.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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