Today’s episode - Cybersecurity ETFs

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Good Morning! 💹 

Cybersecurity isn't just a buzzword; it's a booming industry poised for exponential growth. Cybercrime's staggering cost and the relentless evolution of threats drive companies to fortify their digital defenses, creating a lucrative landscape for investors and job seekers alike. Today, we spotlight seven leading cybersecurity companies and the ETFs offering exposure to their success.

Plus, we've got a bonus: a free, top-rated cybersecurity stock that deserves a spot on your watchlist! Don't miss out on this thrilling ride - the future of cybersecurity is now.

Before delving into the cybersecurity portfolio, why not consider our profitable Gaming industry-focused portfolio?

Let's take note of this well-constructed portfolio focused on the gaming industry, comprising 31 strong stocks. The year-to-date gain is +29.47%. If you had invested in these 31 solid stocks five years ago, the gain would be +244.79%, with an annualized return of +25.78%.

One of the assets in this portfolio is Applovin Corp ($APP), which has grown 77.02% in the past six months. Take a look at the chart below:

Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor before making any investment decisions.

If gaming-related stocks are not suitable for you, how about a technology-packed portfolio focusing on cybersecurity?

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Unveiling the Top Cybersecurity Stocks and ETFs for Savvy Investors

Cybersecurity is one of the hottest industries right now, and for good reason. With cybercrime costing the world billions of dollars annually and companies needing to protect themselves from growing threats, it’s no wonder this sector is booming. In fact, cybersecurity is expected to grow at a 10.5% annual rate over the next four years. Not only does that make it a solid investment opportunity, but it’s also an excellent field if you’re considering a career change. Today, we’ll dive into seven top-performing cybersecurity companies and examine their stock performance. I'll also provide insight into which ETFs (Exchange-Traded Funds) have the most exposure to these companies.

Let’s get started with these 7 key players in the cybersecurity industry:

1. Cloudflare 

Cloudflare is a global cloud platform that offers network services to businesses of all sizes. Their services include Zero Trust Firewalls as a service, which helps inspect and secure connections in office settings, data centers, and for remote employees. They also offer Zero Trust SIM, an eSIM that protects mobile devices from SIM swapping attacks.

Performance Overview:

• Year-to-date: Great start.

• 5-Year CAGR (Compound Annual Growth Rate): Over 46%, which means Cloudflare stock grew by an average of 46% each year for the past five years.

ETF Exposure:

The WisdomTree Cybersecurity Fund has the highest exposure to Cloudflare stock, with 6% of its fund invested in the company.

2. Palo Alto Networks 

Founded over 19 years ago, Palo Alto Networks has made a name for itself with its Next-Generation Firewalls (NGFWs). It offers Cortex, a comprehensive cloud-based security platform, and is trusted by 85 of the Fortune 100 companies. Despite their strong reputation, recent stock performance has been shaky due to lowered revenue projections.

Recent Setback:

In February, Palo Alto Networks announced it expected to earn less than analysts predicted. The reason? Buyer fatigue. Despite the rising number of cyber threats, some companies are pulling back on cybersecurity spending and reallocating budgets towards AI and automation.

Opportunities:

This could present a "buy-the-dip" opportunity for investors. Additionally, smaller cybersecurity firms may see more business as companies look for cheaper alternatives. However, a pricing war could result if Palo Alto starts losing too many clients.

ETF Exposure:

Several ETFs are heavily invested in Palo Alto Networks, offering a way to invest in the company with a bit less risk.

3. CrowdStrike 

CrowdStrike is a leader in cloud-based security, offering its Falcon platform, which runs entirely on the cloud. One of their key differentiators is their single-agent architecture, meaning that customers get all services in one package, as opposed to multiple packages from competitors.

They’re also at the forefront of using AI for threat detection, which enables real-time responses to cyber threats.

Performance Highlights:

• Year-to-date: Strong growth

• 3-Year Performance: Saw a dip, but the company is positioned for future growth.

• Recent Earnings: Stock jumped 20% after beating earnings per share estimates recently.

ETF Exposure:

There are several ETFs with exposure to CrowdStrike, and these will also feature in my upcoming video on the top cybersecurity ETFs.

4. Microsoft 

We all know Microsoft, but did you know they’re also a cybersecurity giant? Microsoft operates a Cyber Defense Operation Center and a Detection and Response Team (DART) that work around the clock to protect their customers. Their cloud security offerings through Azure Security Center and Microsoft Sentinel play a key role in protecting their client’s infrastructure.

Why Microsoft?

• Their vast resources allow them to influence cybersecurity policy.

• Microsoft’s stock continues to perform strongly, making it a safe bet for most investors.

ETF Exposure:

Unsurprisingly, Microsoft is included in most major tech-focused ETFs, but they also pop up in several cybersecurity-specific ETFs due to their role in the industry.

5. Fortinet 

Fortinet is a veteran in the industry, having been around for 24 years. Their flagship product, FortiGate, provides a unified platform for monitoring security across an organization. They are trusted by Fortune 500 companies due to their extensive experience in the sector.

Growth Metrics:

• 5-Year CAGR: 32%, showing consistent, steady growth.

• They’ve been a consistent performer in the cybersecurity space, and several ETFs invest heavily in Fortinet.

6. CyberArk Software

CyberArk takes a unique approach with a focus on Privileged Access Management (PAM). This means they specialize in securing privileged accounts, credentials, and secrets within an organization, which are often targeted by attackers.

Why CyberArk?

• 98% of cyberattacks involve some level of social engineering, and CyberArk's solutions help protect against these by securing user credentials.

• They’ve carved out a niche in the cybersecurity world that differentiates them from other companies.

ETF Exposure:

Several ETFs have a large exposure to CyberArk, and the company has been performing well financially.

7. Broadcom 

Broadcom may be more well-known for its semiconductor business, but it has been steadily growing its cybersecurity offerings. They acquired Symantec’s Enterprise Security business in 2019 and more recently acquired VMware for a staggering $69 billion. These moves have strengthened their position in cybersecurity.

Performance:

• 10-Year CAGR: 36.4%

• Total Return over 10 Years: 2,077%. That’s right—had you invested $50,000 in 2014, you’d be sitting on over $1.1 million today.

ETF Exposure:

Broadcom features heavily in many tech and semiconductor-focused ETFs, but they are increasingly appearing in cybersecurity ETFs due to their recent acquisitions.

Conclusion

Cybersecurity is an industry with massive growth potential, making it an appealing sector for investors. Whether you’re interested in individual stocks or prefer the security of ETFs, there’s plenty of opportunity here.

The information presented here is for informational purposes only and should not be construed as financial advice. Always consult with a qualified financial advisor before making any investment decisions.  

Thank you for reading this far. Let us share our Top Cybersecurity Portfolio with you—it’s FREE!

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Cheers to wealth, wisdom, and a dash of madness!

The Investing Wise Academy Team

Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor before making any investment decisions.

What you need to know

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