The broader stock market may be confused on what to do amid rising tensions between the Trump administration and Iran.
But active traders seem more definitive: the cybersecurity space is a can’t miss opportunity. That’s at least as long as the U.S. is battling it out with Iran and even Iraq on the battlefield and Twitter. The ETFMG Prime Cyber Security ETF — donning a cute ticker symbol of ‘HACK’ — is breaking out to new highs as investors bet corporations will aggressively ramp up spending on cybersecurity protection.
Otherwise known among traders as simply the cybersecurity ETF, the investment vehicle counts cybersecurity stalwarts Cisco, Palo Alto Networks and Fortinet as several of its top 10 holdings.
The ETF has outperformed the S&P 500 the last five sessions during the peak of the geopolitical tensions, rising 2.5% versus unchanged for the broader S&P. But cybersecurity names outside of the ETF’s top 10 holdings have been hotter: CrowdStrike has soared 8.7% while FireEye has tacked on 5%.
“Cyberattacks are a key element to modern warfare and are a likely tactic for Iranian retaliation. The potential threat is beneficial to cybersecurity stocks and are a must own for a so-called “war-time portfolio,” says Renaissance Macro strategist Jeffrey deGraaf.
The rotation into cyber security names at the moment is not without merit.
Iran is responsible for a minimum of 14 major cyberattacks around the world in recent years, according to the Center for Strategic and International Studies. From 2011 to 2013, Iran is said to have unleashed cyberattacks on major U.S. financial institutions such as JPMorgan, Bank of America and Wells Fargo.
“The most likely course of action [cyberattack] is still against an ally that has possibly spent less time and energy on hardening themselves against cyber threats. Saudi Arabia likely presents an easier target with less ability to retaliate effectively,” writes strategists at Academy Securities.