In today’s increasingly interconnected world, strengthening digital defenses is crucial, as evidenced by the rise in cyber threats. Given this positive sentiment, investing in cybersecurity ETFs First Trust NASDAQ Cybersecurity ETF (CIBR), Amplify Cybersecurity ETF (HACK), and Global X Cybersecurity ETF (BUG) might be wise choices for a secured portfolio.
The cybersecurity landscape is expanding as companies worldwide embrace technologies such as cloud computing, AI, IoT, and big data analytics in their digital transformation efforts. This shift may expose businesses to emerging and rapidly evolving cybersecurity threats. The cybersecurity market is expected to grow at a CAGR of 11.4% by 2029.
Moreover, government agencies, businesses, and individuals increasingly recognize cybersecurity’s importance as cyber threats become more prevalent and severe. As per reports, the cloud security segment occupies almost 16% of the market share of the type segment.
With that in mind, let’s look at the fundamentals of the top three cybersecurity ETFs.
First Trust NASDAQ Cybersecurity ETF (CIBR)
CIBR is a non-diversified cybersecurity fund that conventionally invests at least 90% of its net assets in the common stocks and depositary receipts that comprise the index, which includes securities of cybersecurity companies.
The fund has $6.20 billion in assets under management (AUM). Its top holdings are Infosys Limited Sponsored ADR (INFY), which has a 9.68% weighting, Broadcom Inc. (AVGO), which has an 8.41% weighting, and Palo Alto Networks, Inc. (PANW), which has an 8.25% weighting.
CIBR has an expense ratio of 0.59%, compared to the category average of 0.58%. Its fund inflows were $150.18 million over the past three months and $185.58 million over the past six months. Also, it has a beta of 1.09.
The fund pays an annual dividend of $0.26, translating to a 0.48% yield at the prevailing price level. Its dividend payouts have grown at a 41.7% CAGR over the past three years. The fund’s four-year average yield is 0.55%.
Over the past year, CIBR has gained 23.1% to close the last trading session at $55.12. It has also gained 1.2% over the past three months. The ETF had an NAV of $55.33 as of August 10, 2024.
CIBR’s POWR Ratings reflect this promising outlook. The ETF’s overall B rating equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CIBR has an A grade for Buy & Hold and a B for Peer and Trade. Among the 119 ETFs in the Technology Equities ETFs group, it is ranked #18. To access all of CIBR’s POWR Ratings, click here.
Amplify Cybersecurity ETF (HACK)
HACK is the first cybersecurity ETF on the market. The fund follows the ISE Cyber Security Industry classification and splits the industry into two segments: developers of cybersecurity hardware or software and providers of cybersecurity services. To be eligible for inclusion, a company must meet minimum market capitalization and liquidity screens.
The fund’s top holdings include AVGO with a 3.7% weighting, Cisco Systems, Inc. (CSCO) at 6.8%, followed by PANW with a 6.3% weighting.
HACK’s trailing-12-month dividend of $0.12 yields 0.19% on the current price level, while its four-year average dividend yield is 0.36%. Its dividend payouts have grown at a 26% CAGR over the past three years.
The fund's expense ratio is 0.60%, compared to the category average of 0.58%. HACK’s fund outflows were $77.14 million over the past six months and $91.52 million over the past year. The ETF has a beta of 0.78.
HACK has gained 25% over the past year and 19.9% over the past nine months to close the last trading session at $63.29. As of August 10, 2024, HACK had an AUM of $1.66 billion and an NAV of $63.25.
HACK’s POWR Ratings reflect solid prospects. Its overall rating of A equates to a Strong Buy in our proprietary rating system.
HACK has an A grade for Buy & Hold and Peer and a B for Trade. Of the 119 ETFs in the Technology Equities ETFs group, it is ranked #2. Get all HACK ratings here.
Global X Cybersecurity ETF (BUG)
BUG seeks to invest in companies that stand to potentially benefit from the increased adoption of cybersecurity technology, such as those whose principal business is in the development and management of security protocols preventing intrusion and attacks to systems, networks, applications, computers, and mobile devices.
With $751.30 million in AUM, its top holdings are Check Point Software Technologies Ltd. (CHKP), with a 7.2% weighting in the fund, followed by PANW at 6.5%, Fortinet, Inc. (FTNT) at 6.3% weight.
The ETF’s expense ratio is 0.50%, compared to the category average of 0.58%. BUG fund outflows were $19.77 million over the past month. The fund pays an annual dividend of $0.03, which translates to a 0.11% yield at the current price level.
BUG has gained marginally over the past three months to close the last trading session at $28.94. It has a five-year beta of 0.77. The fund’s NAV was $29.02 as of August 9, 2024.
BUG’s solid fundamentals are reflected in its POWR Ratings. The fund has an overall rating of B, which translates to a Buy in our proprietary rating system.
The fund has a B grade for Trade, Peer, and Buy & Hold. BUG is ranked #28 in the same ETF. Click here to access all the BUG ratings.
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CIBR shares were trading at $54.93 per share on Monday afternoon, down $0.40 (-0.72%). Year-to-date, CIBR has gained 2.19%, versus a 12.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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