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  • Home
  • InvestIdeas
  • Cybersecurity Industry Gaining Momentum. Where to Invest to Capitalize on This Trend
Max Manturov

Max Manturov

Head of investment research regulated by CySec

Cybersecurity Industry Gaining Momentum. Where to Invest to Capitalize on This Trend

Cyber crimes have become a global issue: in this year alone, more than ten serious cyber crimes were committed against large strategic enterprises and companies. Here are the most well-known ones.

March 19: Acer got attacked by a ransomware virus called Revil. The hackers demanded a ransom of $50M.

March 23: Sierra Wireless, an IoT device manufacturer based in Canada, was hit by a cyberattack that disrupted internal operations, and the company's website went down.

March 25: CNA Financial, one of the largest US insurance companies, paid hackers $40M to regain control over the internal network.

April 21: Revil, already mentioned above, claimed to have stolen data from Quanta Computer, a manufacturer based in Taiwan; this included blueprints for Apple products.

May 10: A virus attacked Colonial Pipeline Co., a company that operates a 5,500-mile pipeline system that transports fuel from Gulf Coast refineries to the East Coast. The company had to pay the criminals $4.40M.

May14: A hacker attack brought down the information system of a health service in Ireland. Through ransomware, the attackers gained access to the patient data.

June 2: JBS, the world's largest meat producer based in Brazil, was attacked by hackers, as a result of which it had to suspend the operation of most of its factories. The attack targeted the servers that cater to the North American and Australian subsidiaries. JBS had to pay hackers a ransom that amounted to $11M.

July 2: A cyberattack against Kaseya was also allegedly carried out by Revil hackers. The attack not only infected Kaseya's systems, but also hundreds of customer systems in 17 countries. Attackers demand a ransom of $70M.

Cyber crimes became more frequent, as many enterprises started automating its workflow and storing their data on cloud servers; this process was also drastically boosted by the pandemic. As a result, companies and even governments depend on the digital environment reliability, which is why cybersecurity became an essential service, on which huge funds are being spent.

As a study published by Sophos in late April 2021 reports, the average cost for a business to recover from ransomware viruses increased by over 100% over a year: amounting to $0.70M in early 2020, it reached $1.85M in 12 months. The average ransom paid to the attackers blocking computer operations exceeded $170,000. The report by Sophos also says that only 8% of companies were able to fully recover their lost data after being hacked through ransomware, 29% of the businesses managed to recover no more than 50%.

Another study was carried out by Howden, an insurance broker; it found that the price of cyber insurance, which often covers the cost of ransom, increased by an average of 32% compared to June 2020, while the number of ransomware attacks went up by 170% since 2019.

Taking into account all of the above, investing into the cybersecurity market may offer some good potential. Among the investment options, one may consider the below ETFs that include cybersecurity company stocks. Diversification is the core competitive edge of ETFs, which means lower risk for the investor.

First Trust NASDAQ Cybersecurity ETF

Key Facts:

Index: The Nasdaq CTA Cybersecurity Index.

Current Price: $48.37

Assets under management: $4.24B

Dividend yield: 0.19%

Expense Ratio: 0.60%

Number of stocks in the ETF: 40

Companies with the largest share:

  • CrowdStrike Holdings: 6.53%
  • Zscaler: 6.44%
  • Okta: 6.21%
  • Accenture, Plc.: 6.08%
  • Cisco Systems: 5.57%

Regions with the largest share: Americas, 93.80%

Sectors with the largest share: Technology services, 83.90%

Average P/E ratio: 27.20х

YTD yield: 8.60%

Learn more about this ETF here.

To read the Key Information Document (KID) for this ETF, click here.

Global X Cybersecurity ETF

Key Facts:

Index: Indxx Cybersecurity Index.

Current Price: $29.90

Assets under management: $0.58B

Dividend yield: 0.44%

Expense Ratio: 0.50%

Number of stocks in the ETF: 32

Companies with the largest share:

  • CrowdStrike Holdings: 7.21%
  • Zscaler: 6.93%
  • Fortinet: 6.33%
  • Palo Alto Networks: 5.90%
  • Okta: 5.47%

Countries with the largest share: US, 75.10%

Sectors with the largest share: Information Technology, 78.00%

Average P/E ratio: 53.90х

YTD yield: 5.73%

Learn more about this ETF here.

To read the Key Information Document (KID) for this ETF, click here.

iShares Cybersecurity & Tech ETF

Key Facts:

Index: NYSE FactSet Global Cyber Security Index.

Current Price: $44.05

Assets under management: $0.58B

Dividend yield: 0.14%

Expense Ratio: 0.47%

Number of stocks in the ETF: 42

Companies with the largest share:

  • CrowdStrike Holdings: 4.81%
  • Fortinet: 4.60%
  • Docusign: 4.59%
  • Zscaler: 4.56%
  • Okta: 4.54%

Countries with the largest share: US, 81.20%

Sectors with the largest share: Information Technology, 89.00%

Average P/E ratio: 29.49х

YTD yield: 9.16%

Learn more about this ETF here.

To read the Key Information Document (KID) for this ETF, click here.

How to Buy ETFs?

If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.

After opening an account, you can buy ETFs in either of the following ways:

Freedom24 Web Platform: In the Web Terminal section, type CIBR.US (First Trust NASDAQ Cybersecurity ETF  ticker), BUG.US (Global X Cybersecurity ETF ticker), IHAK.US (iShares Cybersecurity & Tech ETF ticker) in the search box, and select the appropriate ETF in the results. Open a secure session in the trading window on the right, select the number of securities you want to buy, and click Buy.

Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type CIBR.US (First Trust NASDAQ Cybersecurity ETF ticker), BUG.US (Global X Cybersecurity ETF ticker), IHAK.US (iShares Cybersecurity & Tech ETF ticker), and select the appropriate ETF in the results. You will then see the ETF in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of securities you want to buy and click Buy.

Go to Freedom24 web platform >>

*Additional information is available upon request. Investment in securities and other financial instruments always involves risks of capital loss. The Client should make himself aware at his own accord, including to familiarize himself with Risk Disclosure Notice. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Commissions, fees or other charges can diminish financial returns. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and do not constitute an investment advice service. The recipient of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein. Information has been obtained from sources believed to be reliable by Freedom Finance Europe Ltd. or its affiliates and/or subsidiaries (collectively Freedom Finance). Freedom Finance Europe Ltd. do not warrant its completeness or accuracy except with respect to any disclosures relative to the Freedom Finance Europe Ltd. and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated.

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