ETF Talk: Benefit from the Buzz About BUG

ETF Talk: Benefit from the Buzz About BUG

Good cybersecurity is all the buzz in a world that’s becoming ever-more reliant on technology.

As discussed last week, the cybersecurity industry is on the upswing, thanks in no small part to the recent prominence of artificial intelligence (AI) and other emerging technologies. The cybersecurity industry works tirelessly to protect systems, networks, programs, devices and data from compromising and potentially damaging cyberattacks.

Of course, all this cybersecurity “buzz” extends to the world of investing as well. And who better to capitalize on that buzz than a bug — Global X Cybersecurity ETF (BUG), that is.

Established in 2019 by Mirae Asset Global Investments Co., Ltd., BUG is an exchange-traded fund that provides exposure to companies involved in the development and management of cybersecurity protocols. The fund’s managers select securities in emerging and developed countries that generate at least 50% of their revenue from cybersecurity activities.

BUG tracks the Indxx Cybersecurity Index, which weights its constituents by market-cap. Each is subject to caps, however, which limits the index’s concentration on large-cap companies and increases its exposure to other companies. The index is reconstituted and re-weighted semi-annually.

Roughly 95% of BUG’s holdings are in the Technology Services sector, with an additional 4.5% in Electronic Technology. As a fund predominantly focused on the cybersecurity industry, this niche makes sense.

In addition, 66% of BUG’s holdings are U.S.-based, with its other holdings mainly in Israel (16.09%), Japan (6.77%), the United Kingdom (4.44%), Canada (3.6%) and South Korea (2.65%). Its top 10 holdings are CrowdStrike Holdings, Inc. (CRWD), Palo Alto Networks, Inc. (PANW), Check Point Software Technologies Ltd. (CHKP), Zscaler, Inc. (ZS), Gen Digital Inc. (GEN), Okta, Inc. Class A (OTKA), Fortinet, Inc. (FTNT), CyberArk Software Ltd. (CYBR), Varonis Systems, Inc. (VRNS) and Radware Ltd. (RDWR).

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Currently, the fund has an expense ratio of 0.50%, and roughly $758.90 million in assets under management. As of June 24, the fund is down 4.03% in the past month, 5.70% in the past three months and 4.13% year to date. However, the fund is also up 19.14% in the past year, indicating that the slight dip is more reflective of the current correction in the technology sector, and possibly presents a prime buying opportunity.

While cybersecurity may be all the buzz, you might discover a profitable opportunity in another hive. Thus, always consider your investment goals and do your due diligence before adding any stock or exchange-traded fund (ETF) to your portfolio.

I remain 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.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.