BUG: A Basket of Cybersecurity Stocks

05/13/2020 5:00 am EST

Focus: ETFS

Carl Delfeld

Chief Analyst, Cabot Global Stocks Explorer

Cybersecurity is one of the fastest-growing segments of IT spending. Chief Information Officers consistently rank cybersecurity as their top spending priority, asserts Carl Delfeld, editor of Cabot Global Stocks Explorer.

In 2019, the average total cost of a data breach for a company was $3.9 million, with 36% of the cost coming from the loss of customer trust.

Damages from cybercrime could cost the world $6 trillion annually by 2021, prompting individuals, companies, and governments to spend a bundle with cybersecurity firms to provide sophisticated software and services to protect proprietary data.

Cybersecurity is a powerful theme that will be further fueled by the growth of new technologies that offer connectivity to data, such as machine learning, cloud computing, and the internet of things.

Global X Cybersecurity ETF (BUG) is a basket of cybersecurity stocks of companies developing and managing security protocols to prevent intrusion and attacks on systems, networks, applications, computers and mobile devices.

This ETF has 29 holdings and the top 10 stocks represent roughly 60% of the total market value (see below chart) of the basket. Seventy-four percent of the companies are incorporated in America, followed by 13% in Israel and 8% in Japan.

Founded in 2005, it is one of the more established cyber pure plays on the market and has expanded its suite of services and warded off upstart disrupters by purchasing smaller start-ups. For now, we recommend buying one half of our intended position in this fund.

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