I believe that Betashares Global Cybersecurity ETF (ASX: HACK) could be the best way to profit on the ASX from the rise of hacking and cybersecurity.
After QBE Insurance Group Ltd (ASX: QBE) recently invested in US cybersecurity outfit Zeguro to create a virtual cybersecurity officer, the chief operating officer, David McMillan, said “Cybersecurity is of increasing concern for businesses of every size, right around the world. Many growing small and medium sized businesses, for whom data is central to their operations, too often lack the resources to effectively manage it.”
Indeed, in recent years we have seen an increasing trend of hacks or attempted foul play.
The 2016 US election, Adobe, Yahoo, Facebook, Equifax, Uber, Sony and so on are just a few examples of data breaches, hacks or cyber interference within the last decade.
There are also a multitude more attempts on businesses, governments and individuals that aren’t successful.
As the bad guys become more advanced, the good guys have to stay one step ahead.
Who are the good guys? Cybersecurity businesses, which we can buy a slice of through the Betashares Global Cybersecurity ETF.
The ETF gives exposure to Cisco Systems, Symantec, Raytheon, Palo Alto Networks, Splunk, FireEye and Juniper among others.
It has generated a 20.86% return over the past year after fees, despite dropping 10.56% during the past month.
Whilst its annual management fee of 0.67% per annum is fairly expensive for an ETF, it’s a fair bit cheaper than a 1% annual fee, which is what most active managers charge in Australia.
As an industry, I imagine that cybersecurity firms will generate earnings growth materially in excess of the general share market, so I think it could be worth holding this ETF as part of your portfolio for the medium-to-long-term.
Entities need to remain extremely secure regardless of whether the economy is up or down, so it could actually be a fairly defensive option, at least in terms of the profits of the underlying businesses.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.