IHAK: Cybersecurity stocks are a hot buy, but risk management is required (NYSEARCA:IHAK)

Cybersecurity stocks have lost some of their luster this year. Much of 2023 has been a hot spot, especially the last 10 weeks of the year, when stocks of companies like CrowdStrike (CRWD) rose.while using technology While attacks have been intermittent over the past few months, the topic of cybersecurity has at least received some respite. Considering the pullback, I think we have a chance today.

I repeat iShares Cybersecurity and Technology ETF Buy Rating (NYSEARCA:IHAK). I'm bullish on this space in Q3 2022, and while the fund price volatility continued into early 2023, IHAK is a prime candidate to be overweight throughout the run-up to its all-time high in February 2024. It was spot on.

Cyber ​​security stocks slump, flat year-on-year versus SPX

According to the publisher, IHAK seeks to track investments Results of an index comprised of developed and emerging market companies involved in cybersecurity and technology, including cybersecurity hardware, software, products, and services. It introduces investors to companies at the forefront of national and international cybersecurity innovation, primarily in the information technology sector.

IHAK is a relatively small ETF, with just $801 million in assets under management as of May 10, 2024. This fund loses its luster in the following ways. Stock price momentum, which now has a lower rating of C+ compared to its A+ ETF grade by Seeking Alpha just three months ago. IHAK Sport is moderate Annual expense ratio 0.47%, And that Dividend yield for the last 12 months It is very low at only 0.13%.

too high risk portfolio Considering the historical standard deviation and somewhat concentrated allocation, still Liquidity Considering that the average daily trading volume is just under 100,000 shares, the B rating is fair, but the 30-day median bid-ask spread of 7 basis points is a concern. Therefore, we recommend using limit orders.

The Morningstar 3-Star Gold Rated ETF features some diversification across the style box, but its heavy tilt toward small-cap growth size and style also makes this fund a good choice for more aggressive investors. That's one of the reasons why I like it so much. Only 16% of IHAK is considered large-cap stocks, and only 1% is value stocks. And with a price-to-earnings ratio of over 28 times, investors are capturing strong long-term earnings growth of nearly 11%.

IHAK: Portfolios and factor profiles

As the ETF's name suggests, IHAK is primarily a technology fund. Only 5% of the portfolio is invested in the industrial sector and has no access to other market sectors. Additionally, the risk is concentrated, given that the top 10 stocks make up nearly half of his ETF.

IHAK: Holdings/dividend information

Seasonally, this is a pretty bullish time for the cybersecurity space. To understand seasonal trends, we looked at the long-lived Amplify Cybersecurity ETF (HACK). While May and his July have been some of the strongest months in history since 2015, June's performance has been even more lackluster.

Cybersecurity stocks: May and July trends are bullish, June is weak

technical view

After a significant pullback, IHAK held as support the 200-day moving average, which had been rising just a few weeks ago. The chart below shows the stock testing all-time highs and actually briefly surpassing its late 2022 peak of $49.09 before falling more than 10% to a low around $43 in April. Please note that What I like about today's technicals is that the RSI Momentum Oscillator broke the downtrend from the December highs long before the price rose to near $50 (which, by the way, was a bearish divergence). did). However, momentum often drives the price, so we wouldn't be surprised if IHAK rises through a falling short-term 50-day moving average.

The $43 low earlier this quarter was also a successful test of the lowest price from early 2024. Of course, this setup also has the characteristics of a bearish head-and-shoulders top pattern. If the stock price falls below $43, downside action will be applied that lowers the price target to approximately $36. This is an important feature to monitor over the coming weeks and months.

Overall, the technicals are mixed, but given the pullback, I think now is a good time to go long ETFs.

IHAK: Resistance at $49, Major Support at $43, RSI Breakout

conclusion

I reiterate my buy rating on IHAK. Cybersecurity funds are off their all-time highs, and despite the industry's EPS growth, the chart is noteworthy.