Stock market investors are likely hoping to put 2018 behind them. It was a year to forget, except maybe for short-sellers. Just about every sector crumbled under the weight of global economic worry. Even market darlings like the FAANG stocks struggled. (Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFTLX), Google (GOOG))
But there was one beacon of light — cybersecurity. Canada’s top performing unlevered equity ETF in 2018 was the Evolve Cyber Security Index ETF (CYBR-B.TO). It returned a handsome 19.4 per cent.
Considering the damage from recent breaches like Marriott’s Starwood hack and others, the sector has huge growth potential. So 2019 could be another strong year for cyber security.
“There is a growing shortfall of information security specialists. An unrelenting cascade of new and existing threats that compromise, damage and cripple organizations of every size, and year-over-year increase in corporate spending for information security by both small-cap and Fortune 500 organizations,” says Robert Hudyma, Associate Professor at Ted Rogers School of Management.
“This market will continue to accelerate, fueled by new internet of things devices as they become woven into the fabric of our society.”
CYBR is a basket of 36 companies involved in cyber security through hardware and software development from around the world, mostly from the U.S. The three largest holdings are Akamai, Symantec, and F5 Networks.
“Companies and governments worldwide continue to increase their budgets on cyber security and many of the beneficiaries are in CYBR’s portfolio,” says Raj Lala, President & CEO at Evolve ETFs
“These companies – or as we call them, ‘the good guys’, are very different from traditional technology.”
That’s in stark contrast to companies like Facebook. Traditional tech companies lagged CYBR by a wide margin. The Horizons ETF (HXQ.T) tracks the tech-heavy NASDAQ 100 and it returned 6.5 per cent. Note both ETFs track U.S. benchmarks and are currency unhedged. In other words, a rising greenback compared to the loonie helps boost performance.