The Betashares Global Cybersecurity ETF (ASX: HACK) has been a very successful investment over the last several years.
The exchange-traded fund (ETF) has delivered an average return per annum of 16.7% since it started in August 2016. There aren't too many ETFs that have delivered that sort of return on the ASX over the same time period.
But, as we know, past performance is not necessarily indicative of future performance. So, I'm going to consider whether the HACK ETF is an investment worth looking at or not.
I'm not an expert on cybersecurity but it seems like there has been an increase in cyber attacks, at least in Australia.
The Australian Cyber Security Centre (ACSC) report for 2021-2022 showed there were more than 76,000 cybercrime reports over the year, an increase of 13% year over year. The report also said there was an increase in financial losses due to business email compromise (BEC), to more than $98 million.
The ACSC report also said there was a rise in the average cost per cybercrime report to more than $39,000 for small business, $88,000 for medium business, and $62,000 for large business. That represented an average increase of 14%.
While all of this certainly isn't a positive for society, it would logically increase demand for cybersecurity services. According to Statista, the global cybersecurity market is expected to grow from US$248.3 billion in 2023 to $345.4 billion in 2026 and US$478.7 billion in 2030.
According to BetaShares, the HACK ETF is invested in 35 positions, from "global cybersecurity giants" to "emerging players".
Considering the fairly specific allocation the HACK ETF gives, I think it has a very reasonable management fee of 0.67%.
Negatives about the HACK ETF right now
I think the long-term for the Betashares Global Cybersecurity ETF is very positive. However, the more an investment rises in the short-term, I'd suggest it has more chance of getting too far ahead of today's fair valuation.
The HACK ETF has gone up 28% in 2023 to date, though it's still down 8% from the unit price at the end of 2021, so the rise has simply recovered lost ground.
On a traditional valuation metric, it does seem a bit pricey. According to BetaShares, at the end of August 2023, the forward price/earnings (P/E) ratio was 23 times. But, it would be fair to say the HACK ETF may justify a higher P/E ratio because of its growth outlook and how essential (and defensive) cybersecurity services are.
There aren't any strong negatives in my mind, but I would also point out this is a sector-specific ETF, so it's important to seek diversification with other investment options and get an allocation to other sectors.
I think the HACK ETF is one of the most solid investment options around, so I'd be very happy to have it in my portfolio. It could provide a mixture of defensive and growth characteristics.