10 Best Cybersecurity ETFs
In this article, we discuss 10 best cybersecurity ETFs to buy. If you want to skip our detailed discussion on the cybersecurity market, head directly to 5 Best Cybersecurity ETFs.
According to the World Economic Forum’s “Global Cybersecurity Outlook 2023”, increased worldwide political instability has contributed to uniting the perspectives of business and cyber leaders regarding the significance of managing cyber risks. This outlook report indicates that 93% of those in charge of cyber-related matters and 86% of business executives believe there is a "moderate" to "high" probability that worldwide geopolitical turbulence will result in a significant and far-reaching cyber catastrophe within the upcoming two years. Similarly, 74% of leaders within organizations observed that the instability in global geopolitics has had a "moderate" to "significant" impact on shaping their strategies concerning cybersecurity.
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Canalys, a technology research firm, noted that despite deteriorating macroeconomic conditions, the global cybersecurity market demonstrated robust growth of 12.5% year-over-year, reaching a value of $18.6 billion in the first quarter of 2023. This growth rate exceeded that of the broader technology industry. The Q1 2023 results aligned with Canalys' optimistic projections. Identity security and securing hybrid workers were the core focus, driving investments in Secure Web and Email (SSE) security, which grew by 16.0%. Larger customers experienced the highest growth, with sales to companies having 500+ employees rising by 13.3%, and 13.5% for those with 100 to 499 employees. Palo Alto Networks, Inc. (NASDAQ:PANW) emerged as the leading vendor for both large and medium-sized companies. Cybersecurity sales to small and micro businesses also increased, with 7.5% growth for companies with 10 to 99 employees, and 4.3% growth for those with 1 to 9 employees. According to Matthew Ball, chief analyst at Canalys:
“Customers prioritized spending on the most urgent projects and those that delivered the greatest return. Longer sales cycles, delays and downsizing of projects increased, while hardware refresh programs have been pushed to future quarters.”
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The International Data Corporation has reported that the artificial intelligence (AI) segment within the cybersecurity industry is expanding at a compound annual growth rate (CAGR) of 23.6%. By the year 2027, AI in cybersecurity is forecasted to achieve a market value of $46.3 billion. The prevalence of cybercrime is skyrocketing. Cybersecurity Ventures predicts that the cost of cybercrime is anticipated to be $8 trillion in 2023, with further escalation to $10.5 trillion by 2025.
Some of the best cybersecurity stocks to invest in include CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Fortinet, Inc. (NASDAQ:FTNT), and Palantir Technologies Inc. (NYSE:PLTR). However, in this article, we discuss the best cybersecurity ETFs, which provide access to a diverse portfolio of cybersecurity stocks.
Our Methodology
We chose ETFs that offer exposure to large-, mid- and small-cap cybersecurity stocks to create a well-rounded list of the popular funds. We have also discussed the top holdings of the ETFs to offer better insight to potential investors. These cybersecurity ETFs have amassed significant gains in the last 5 years. The list is ranked in ascending order of the 5-Year performance of these ETFs as of August 6, 2023.
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Best Cybersecurity ETFs
10. CI Digital Security ETF (TSE:CBUG.TO)
5-Year Performance as of August 6: -1.46%
CI Digital Security ETF (TSE:CBUG.TO) aims to mirror the performance of the Solactive Digital Security CAD Hedged Index, which represents the global digital security industry. As of August 4, 2023, the ETF holds C$13.92 million in total net assets and offers an expense ratio of 0.40%. It is a recently launched fund, having commenced operations on February 24, 2022. CI Digital Security ETF (TSE:CBUG.TO) is one of the best cybersecurity ETFs to buy.
Palo Alto Networks, Inc. (NASDAQ:PANW) is the largest holding of CI Digital Security ETF (TSE:CBUG.TO). Palo Alto Networks, Inc. (NASDAQ:PANW) delivers cybersecurity solutions worldwide. On July 27, Oppenheimer removed Palo Alto Networks, Inc. (NASDAQ:PANW) from its Top Picks list, however, analyst Ittai Kidron maintained an Outperform rating and a price target of $290 on the stock.
According to Insider Monkey’s Q1 database, Ken Griffin’s Citadel Investment Group is a significant position holder in the company, with approximately 3 million shares worth $591.5 million. Overall, 87 hedge funds were bullish on Palo Alto Networks, Inc. (NASDAQ:PANW) in Q1 2023, compared to 85 funds in the prior quarter.
In addition to CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Fortinet, Inc. (NASDAQ:FTNT), and Palantir Technologies Inc. (NYSE:PLTR), Palo Alto Networks, Inc. (NASDAQ:PANW) is one of the best cybersecurity stocks to buy.
TimesSquare U.S. Mid Cap Growth Strategy made the following comment about Palo Alto Networks, Inc. (NASDAQ:PANW) in its Q4 2022 investor letter:
“Within Information Technology, Palo Alto Networks, Inc. (NASDAQ:PANW) offers network security solutions to enterprises, services providers, and government entities. The company delivered another strong quarter with revenues, billings, and earnings all above the consensus. Management recognizes a challenging macro environment that is altering customer behavior such as increased deal scrutiny and elongating sales cycles. Their shares pulled back by -15% during the quarter.”
9. ETFMG Prime Cyber Security ETF (NYSE:HACK)
5-Year Performance as of August 6: 33.47%
ETFMG Prime Cyber Security ETF (NYSE:HACK) tracks a selection of companies offering cybersecurity solutions, encompassing hardware, software, and services. It is designed to replicate The Prime Cyber Defense Index, which serves as its underlying benchmark. ETFMG Prime Cyber Security ETF (NYSE:HACK) was introduced on November 11, 2014. As of August 5, 2023, the ETF's assets amount to $1.4 billion, and it operates with an expense ratio of 0.60%. ETFMG Prime Cyber Security ETF (NYSE:HACK) has a portfolio of 53 stocks. It is one of the best cybersecurity ETFs to buy.
Booz Allen Hamilton Holding Corporation (NYSE:BAH) is the largest holding of the ETFMG Prime Cyber Security ETF (NYSE:HACK). Booz Allen Hamilton Holding Corporation (NYSE:BAH) offers a wide range of services, including management and technology consulting, analytics, engineering, digital solutions, mission operations, and cyber services worldwide. On July 28, Booz Allen Hamilton Holding Corporation (NYSE:BAH) reported its financial results for the first quarter of fiscal year 2024. The company posted a non-GAAP EPS of $1.47 and a revenue of $2.65 billion, exceeding Wall Street estimates by $0.22 and $140 million, respectively.
According to Insider Monkey’s first quarter database, 34 hedge funds were bullish on Booz Allen Hamilton Holding Corporation (NYSE:BAH), compared to 36 funds in the prior quarter. Michael Rockefeller and Karl Kroeker’s Woodline Partners is the largest stakeholder of the company, with 433,344 shares worth $40.16 million.
Baron Asset Fund made the following comment about Booz Allen Hamilton Holding Corporation (NYSE:BAH) in its second quarter 2023 investor letter:
“We re-initiated a position in Booz Allen Hamilton Holding Corporation (NYSE:BAH), the premier provider of outsourced civil and military consulting services to the federal government. We believe that Booz’s consultants (65% of whom possess security clearances) are best in class at tackling sensitive and high priority cybersecurity, intelligence, defense, and spending efficiency projects for various government agencies. Under longtime CEO Horacio Rozanski, the company has thoughtfully invested in AI, cybersecurity, software, and other advanced technologies. It had remained ahead of its peers and is an important partner providing the government mission-critical and highly technical solutions. In addition, Booz is the largest single provider of AI services to the federal government, which we believe will be a source of ongoing, outsized growth.
We believe the ongoing U.S. military rivalry with Russia and China will provide a tailwind for increased defense budget growth and enhance the demand for Booz’s services. Booz expects to continue outgrowing its consulting peers by 2% to 4% annually, translating to mid- to high single-digit organic revenue growth that will be enhanced by targeted acquisitions. We expect improved pricing realizations and gradually increased margins as well.”
8. iShares Digital Security UCITS ETF (LON:SHLD.L)
5-Year Performance as of August 6: 48.16%
iShares Digital Security UCITS ETF (LON:SHLD.L) aims to replicate the performance of the STOXX Global Digital Security Open Net Index, consisting of developed and emerging market companies that generate substantial revenues from digital security-related sectors. Established on October 29, 2018, the ETF comes with an expense ratio of 0.40% and holds a portfolio of 104 stocks. iShares Digital Security UCITS ETF (LON:SHLD.L) is one of the best cybersecurity ETFs to invest in.
Tenable Holdings, Inc. (NASDAQ:TENB) is one of the largest holdings of the iShares Digital Security UCITS ETF (LON:SHLD.L). Tenable Holdings, Inc. (NASDAQ:TENB) offers cloud-based cyber exposure solutions across the Americas, Europe, the Middle East, Africa, the Asia Pacific, and Japan. On July 25, Tenable Holdings, Inc. (NASDAQ:TENB) reported a Q2 non-GAAP EPS of $0.22 and a revenue of $195 million, outperforming Wall Street estimates by $0.10 and $6.51 million, respectively.
According to Insider Monkey’s first quarter database, 29 hedge funds were long Tenable Holdings, Inc. (NASDAQ:TENB), compared to 30 funds in the prior quarter. Bruce Emery’s Greenvale Capital is the largest stakeholder of the company, with 4.26 million shares worth $202.60 million.
Carillon Tower Advisers made the following comment about Tenable Holdings, Inc. (NASDAQ:TENB) in its Q3 2022 investor letter:
“Tenable Holdings, Inc. (NASDAQ:TENB) pulled back during Q3, as they suffered through similar issues seen at Rapid7. The sales cycle is elongating for all enterprise software sales, and Tenable is not immune to those pressures. The stock weakness this year is tied to valuation compression, rather than negative sales, earnings or EBITDA trends.”
7. Global X Cybersecurity ETF (NASDAQ:BUG)
5-Year Performance as of August 6: 49.31%
Global X Cybersecurity ETF (NASDAQ:BUG) aims to mirror the performance of the Indxx Cybersecurity Index in terms of price and yield performance. Its primary focus is on investing in companies that could gain from the growing use of cybersecurity technology. Global X Cybersecurity ETF (NASDAQ:BUG) was launched on October 25, 2019, and holds net assets worth $655.50 million as of August 4, 2023, with an expense ratio of 0.51%. The ETF has a compact portfolio, comprising only 23 stocks. Global X Cybersecurity ETF (NASDAQ:BUG) is one of the best cybersecurity ETFs to watch.
Global X Cybersecurity ETF (NASDAQ:BUG)’s largest holding is Zscaler, Inc. (NASDAQ:ZS), a California-based cloud security company. On July 25, investment firm BTIG upgraded Zscaler, Inc. (NASDAQ:ZS) stock from Neutral to Buy, along with a price target of $185, citing improved demand for cloud security and delayed projects now resuming progress.
According to Insider Monkey’s first quarter database, 38 hedge funds were bullish on Zscaler, Inc. (NASDAQ:ZS), compared to 42 funds in the last quarter. John Overdeck and David Siegel’s Two Sigma Advisors is a prominent stakeholder of the company, with 1 million shares worth $122.6 million.
Artisan Global Discovery Fund made the following comment about Zscaler, Inc. (NASDAQ:ZS) in its Q4 2022 investor letter:
“Zscaler, Inc. (NASDAQ:ZS) provides cloud-based Internet security solutions. In the quarter, it announced 54% revenue growth and expected growth of nearly 40% in 2023 (ahead of expectations). Despite solid fundamental momentum, shares have underperformed this year as investors have grown concerned about slowing demand for enterprise software as the broader global economy slows. We believe the dual trends of rising security vulnerability and increased enterprise digitization will lead to sustained demand, even in a recession. Cybersecurity remains a top concern for businesses and governments alike as cyberattacks can have devastating financial and reputational consequences. Meanwhile, managing the security needs of legacy on-premise applications, a growing number of cloud-based applications (Office 365, Salesforce, etc.) and a more remote workforce (versus pre-pandemic) make operating IT infrastructures increasingly complex. Give the attractive long-term outlook and depressed valuations, we added to the position.”
6. L&G Cyber Security UCITS ETF (BIT:ISPY.L)
5-Year Performance as of August 6: 50.40%
L&G Cyber Security UCITS ETF (BIT:ISPY.L) follows a complete replication strategy with the objective of tracking ISE Cyber Security UCITS Index's performance. The fund’s goal is to seize the significant growth opportunities presented by cybersecurity products and services. This ETF was introduced on September 28, 2015. As of June 2023, L&G Cyber Security UCITS ETF (BIT:ISPY.L) carries an expense ratio of 0.69% and it is one of the top cybersecurity ETFs to buy.
BlackBerry Limited (NYSE:BB), a Canadian cybersecurity provider, is one of the largest holdings of L&G Cyber Security UCITS ETF (BIT:ISPY.L). On June 28, BlackBerry Limited (NYSE:BB) reported its results for the first quarter of fiscal 2024. The company posted a non-GAAP EPS of $0.06 and a revenue of $373 million, outperforming Wall Street estimates by $0.11 and $213.71 million, respectively. Revenue for the quarter increased 122.0% on a year-over-year basis.
According to Insider Monkey’s first quarter database, 15 hedge funds were bullish on BlackBerry Limited (NYSE:BB). Prem Watsa’s Fairfax Financial Holdings is the leading position holder in the company, with 46.7 million shares worth $213 million.
Like CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Fortinet, Inc. (NASDAQ:FTNT), and Palantir Technologies Inc. (NYSE:PLTR), BlackBerry Limited (NYSE:BB) is one of the top cybersecurity players in the market.
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Disclosure: None. 10 Best Cybersecurity ETFs is originally published on Insider Monkey.
