Cybersecurity has never been more important than it is today. Nonstop hacking means protection is an absolute necessity for both businesses and governments. So what if you want to buy stocks in this high-growth sector?
Well, this is where it gets a little tricky. That's because the options range from specialized cybersecurity companies to more diversified companies. And we will continue to publish more.
That's why I think L&G Cybersecurity UCITS ETF (LSE: ISPY) may be a smarter way to invest in this space.
take a basket approach
This exchange-traded fund (ETF) invests in 41 different cybersecurity stocks. It aims to track the performance of the ISE Cyber Security UCITS Index, which has recorded a return of 220% since its inception in 2015.
The top 10 holdings (as of March 21st) are top-notch.
|
portfolio weight |
|
|
juniper networks |
5.75% |
|
crowdstrike holdings |
5.73% |
|
fortinet |
5.53% |
|
cyberark software |
5.46% |
|
cloudflare |
5.34% |
|
broadcom |
5.32% |
|
Check Point Software Technologies |
4.75% |
|
dark trace |
4.71% |
|
sentinel one |
4.54% |
|
jiff davis |
4.51% |
After surging 142% in 12 months. cloud strike The stock trades at an impressive forward price/earnings ratio of 83 times. Buying individual stocks at that valuation may be risky.
However, as you can see, it only makes up about 5.7% of the ETF. This means it could potentially benefit from CrowdStrike's continued growth while limiting the downside of the fund's inherent diversity.
I think the portfolio is solid and can withstand the ETF's 0.69% recurring charge. That being said, ideally you want a low head.
US concentration
Two other stocks I like here are: dark tracebased in Cambridge FTSE250 Enterprise and edge computing companies cloudflare. Both are growing rapidly and have significant market opportunities.
However, one issue I would like to highlight is that about 74% of the stock is listed in the US. Therefore, any volatility within a state can have a significant impact on an ETF's performance.
For example, the national debt currently stands at approximately $34 trillion. Recently, it was increasing by about $1 trillion every 100 days.
This is not something to panic about, but it could be a bigger problem and cause turmoil in the US stock market.
Ready to replenish
The global market for AI-based security products is estimated to reach $133.8 billion by 2030, up from $14.9 billion in 2021, according to Acumen Research and Consulting.
This is a compound annual growth rate of over 27%.
Additionally, the recent publication of large-scale language models (LLMs) further increases the need for protection. That's because hackers are now using generative AI to create malicious software and create convincing phishing emails.
Actually, I was reminded of this recently when I opened an email saying that I won the lottery. Of course I had my suspicions that it wasn't a jackpot – after all, in EuroMillions it was only £3.40 – but still, I hit all the links available to find out. I noticed that there was.
If it was fishing, I'd have hook, line, and sinker.
Anyway, by buying shares of this ETF, IInvesting in the guardians of the digital economy” says the fund's literature.
I've had this in my portfolio for a while and it's worked really well. But given the rise of AI-emboldened hackers, it may be ready for replenishment.
The post This ETF could be a smart way to buy the best cybersecurity stocks appeared first on The Motley Fool UK.
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Ben McPoland has a position in CrowdStrike and Legal & General Ucits ETF Plc – L&g Cyber Security Ucits ETF. The Motley Fool UK recommends Cloudflare, CrowdStrike, and Fortinet. The views expressed on the companies mentioned in this article are those of the writer and may differ from official recommendations we make on subscription services such as Share Advisor, Hidden Winners, or Pro. At The Motley Fool, we believe that considering diverse insights makes us better investors.
The Motley Fool UK 2024
