ETF Talk: Steer Your Ship Right with This ‘CIBR’-security ETF

“Then the ships were driven headlong, and their sails were torn to shreds by the violence of the wind. So we lowered the sails… and rowed the ships hurriedly toward the land. There for two nights and two days we lay… But when fair Dawn brought… the third day, we set up the masts and hoisted the white sails… and the wind and the helmsmen steered the ships.” — Homer, “The Odyssey”

The world is awash in artificial intelligence (AI) and emerging technologies. The internet has shifted much of our lives into the ocean of the online network, creating new vulnerabilities and necessarily prompting new forms of protection.

What kind of protection, you may ask. Well, dear reader, this is where cybersecurity comes into play. Cybersecurity is a large and growing industry that specializes in technologies, processes and controls that protect systems, networks, programs, devices and data from cyberattacks.

In other words, cybersecurity protects a business’s digital assets and employees, as well as your and my everyday personal transactions.

We get this not-so-newfangled word by combining “cyber” and “security,” but the origin of the former has its roots in the ancient Greek “κυβερνήτης,” meaning steersman or pilot (obviously of a ship, if you’re an ancient Greek man).

So, this week, I’ll be your helmsman, steering this ship to the cybersecurity exchange-traded fund (ETF): First Trust NASDAQ Cybersecurity ETF (NASDAQ: CIBR).

Launched in 2015, CIBR follows the price and yield of the Nasdaq CTA Cybersecurity Index and is made up of companies classified as engaging in cybersecurity, as defined by the Consumer Technology Association.

It includes companies primarily involved in the building, implementation and management of security protocols applied to private and public networks, computers and mobile devices to provide protection of the integrity of data and network operations.

With cybercrimes having become a major global threat (think malware, phishing, deepfakes, among others) and user-friendly generative AI being used to create malware and disinformation, having cybersecurity battleships patrolling the network waters has become imperative.

The World Economic Forum estimates that the cost to the global economy caused by cyberattacks will rise from $8.44 trillion in 2022 to $23.84 trillion by 2027.

In case all of this is taking the wind from your sails, let me remind you that with the rise of cybercrime comes the rise of spending to combat it. Overall global spending on amping up cybersecurity has risen, making this a high-growth industry worth investing in.

CIBR presents such an opportunity, with excellent exposure to the cybersecurity industry. It is one of the oldest ETFs in this space and is actively traded, maintaining solid performance, even in troubled market waters. The fund has outperformed similar ETFs over the last five years.

The fund has net assets of $6.11 billion, an expense ratio of 0.59% and a dividend yield of 0.47%. The fund is down 1.07% for the last month, down 7.35% for the past three months and up 21.67% year to date. It is evaluated semi-annually and rebalanced quarterly.

Perhaps unsurprisingly, the fund’s exposure heavily favors Software, at 54.43%, with IT Services following at 13.44% and Communications Equipment at 10.21%. Professional Services, 9.48%, Semiconductors and Semiconductor Equipment, 8.94% and Aerospace and Defense, 3.50% round out the fund.

Top holdings include Broadcom Inc. (AVGO), CrowdStrike Holdings, Inc. (CRWD), Palo Alto Networks, Inc. (PANW), Cisco Systems, Inc. (CSCO), Infosys Limited (INFY), Darktrace Plc (DARK.L), Leidos Holdings, Inc. (LDOS), Gen Digital, Inc. (GEN), Thales S.A. (THAL.VI/HO.PA) and Booz Allen Hamilton Holding Company (BAH).

Chart Courtesy of StockCharts.com.

While performance across the industry has been mixed of late, the long-term outlook is strong with significant growth predicted. That CrowdStrike is the second-highest holding in this fund (at 7.62%) makes this ETF a secure bet for investors; in the face of industry headwinds, CrowdStrike recently traded near its all-time high, gaining 33% in revenue in the first quarter.

Allocating to strong industry players like this one and keeping a diverse portfolio makes CIBR a worthy port at which to dock your investment ship. So, as Odysseus and his crew trusted their helmsman to steer them from danger, so let the fair winds of cybersecurity growth fill the sails of your portfolios.

Be aware, however, that this is a fast-moving industry with high competition and rapidly changing technologies. Investors should always do their due diligence before adding any stock, fund or ETF to their portfolio.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me. You may see your question answered in a future ETF Talk.