The global cybersecurity market is expected to expand at a healthy compound annual growth rate (CAGR) of 10.0% through 2027 as cybercrime affects 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.
- The cybersecurity industry has outperformed the broader market in the past year.
- The ETFs with the best 1-year trailing total return are BUG, IHAK, and CIBR.
- The top holding of each of these ETFs is class A shares of CrowdStrike Holdings Inc.
There are 4 ETFs that trade in the U.S. focused on the cybersecurity sector: the Global X Cybersecurity ETF (BUG), the First Trust NASDAQ CEA 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 outperformed the broader market with a total return of 33.0% over the past 12 months compared to the S&P 500's total return of 20.8%, as of February 2, 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 February 3, 2021.
Global X Cybersecurity ETF (BUG)
- Performance over 1-Year: 66.1%
- Expense Ratio: 0.50%
- Annual Dividend Yield: 0.45%
- 3-Month Average Daily Volume: 231,654
- Assets Under Management: $266.4 million
- Inception Date: October 28, 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. About three quarters of its 28 holdings are based in the U.S., with the remaining quarter spread across Israel, Britain, Japan, and South Korea. Its top three holdings include class A shares of CrowdStrike Holdings Inc. (CRWD), a holding company whose subsidiaries provide cyber security platforms; Palo Alto Networks, Inc. (PANW), a provider of network security solutions; and Zscaler Inc. (ZS), a cloud-based security software company.
iShares Cybersecurity and Tech ETF (IHAK)
- Performance over 1-Year: 49.6%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 0.39%
- 3-Month Average Daily Volume: 127,119
- Assets Under Management: $348.1 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. Nearly 80% of the fund's 48 holdings are based in the U.S., with the rest based in Israel, Japan, Canada, and Taiwan. It follows a blended strategy, investing in a mix of growth and value stocks. The fund's top holdings include class A shares of CrowdStrike Holdings; BlackBerry Limited (BB:TSE), a Canadian multinational that provides software and services; and Palo Alto Networks Inc.
First Trust NASDAQ CEA Cybersecurity ETF (CIBR)
- Performance over 1-Year: 48.1%
- Expense Ratio: 0.60%
- Annual Dividend Yield: 1.09%
- 3-Month Average Daily Volume: 735,500
- Assets Under Management: $3.5 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 41 holdings 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 class A shares of CrowdStrike Holdings; Zscaler Inc.; and Cisco Systems Inc. (CSCO), the maker of telecommunications and networking hardware and software.
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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