Cybersecurity ETFs Could Be Captivating Again in 2021

Technology stocks and the related exchange traded funds soared last yea and investors could be in for more of the same this year, particularly as recent cybersecurity vulnerabilities come to light. That scenario could be a catalyst for the First Trust NASDAQ Cybersecurity ETF (NYSEArca: CIBR) .

Source: Cybersecurity ETFs Could Be Captivating Again in 2021

CIBR seeks investment results that generally correspond to the price and yield f an equity index known as the Nasdaq CTA Cybersecurity IndexSM, which is comprised of securities of companies classified as “cybersecurity” companies by the CTA.

In the age of digital communications, an increasing number of professionals are growing concerned about potential digital threats, bolstering demand for cybersecurity. Investors can also capitalize on this growing industry through sector-specific ETF plays.

“Last year ended with a bang for security software stocks, as the still-unfoldingSolarWinds “Sunburst” hack spread and investors piled into the sector looking for companies likely to benefit from an expected increase in spending in response,” reports Eric Savitz for Barron’s.

CIBR Could Shine This Year

CIBR has utility as a long-term play for tactical investors because the number of cyberattacks is rising while corporations and governments are devoting more capital to guarding against these intrusions.

The Solarwinds hack may be the tipping point that helps drive changes in governmental policies, compliance, and business responses, elevating cybersecurity to a societal level risk. This results in increased investment levels as government funding, compliance measures, and security investments become a larger focal point over a longer time.

Cybersecurity has already been under the spotlight as the Coronavirus pushes more to work at home. The increased shift to work-at-home could fuel demand for personal cybersecurity and network security.

Increased digital working exposure has made many companies (and their remote employees) more susceptible to cyberattacks. As more businesses look to make the internet of things the core of their revenue generation models, it leaves systems more prone to hackers if the right cybersecurity measures aren’t in place.

“While the initial IT response to the global pandemic resulted in significant digital transformation-related security and infrastructure spending, the Sunburst hack served to remind practitioners and investors alike of what is potentially at risk from cyber attack,” Piper Sandler analyst Rob Owens writes. “This should lend to a strong spending cycle for some time to come. Looking ahead, we remain bullish on the fundamental backdrop for our sector.”

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.