There are secular trends, and then there are secular trends.
The cybersecurity space is one of those unique niche sectors I think will be one of the best-performing areas of the economy for a long time. Spending on cybersecurity solutions will only increase over time. Technology companies are getting bigger and more sophisticated, yet spending on this essential need hasn’t kept pace.
Those looking to take advantage of the secular tailwinds in cybersecurity have many great options to choose from. In this article, I’m going to discuss one Canadian ETF and one U.S. ETF to consider.
Evolve Cyber Security ETF
The first Canadian ETF to tackle the cybersecurity secular growth theme is Evolve Cyber Security Index ETF (TSX:CYBR). This is an ETF that has seen massive capital inflows in recent years. Indeed, there is a massive appetite for gaining exposure to this secular theme. If you believe government agencies and big tech will be constantly under attack, cybersecurity firms will have to fill an important role in the economy.
It is surprising how relatively limited spending on cybersecurity by technology firms today happens to be. Accordingly, I expect there to be a growing pie for these companies to go after. This is a growth sector like no other, and the Evolve ETF has an excellent portfolio of companies in this space. Since this ETF is TSX listed, Canadian investors get access to these companies without having to venture onto foreign exchanges.
This is an ETF I would certainly recommend Canadian investors throw in a TFSA and leave it there. Indeed, Evolve Cyber Security ETF is well diversified, with great core holdings able to generate long-term portfolio outperformance. This is one of those long-term growth investments I think is well suited for one’s grandkids.
iShares Cybersecurity ETF
In the U.S., iShares Cybersecurity and Tech ETF (NYSE:IHAK) is my top way to play this secular trend. This ETF has incredible fundamentals relative to its growth potential. Trading at only 3.8 times sales and 11 times long-term earnings, this is a cheap way to play the growth in this sector. Analysts expect long-term sales growth and cash flow growth of 8.4% and 5.7%, respectively. Those are incredible numbers to consider for those with a growth-oriented mindset.
Surprisingly, this ETF actually pays out a yield of 0.5%. That’s a tiny yield. However, if one believes in the long-term growth potential of the companies in this portfolio, this yield could grow substantially over time.
I think the diversified nature of this portfolio, the quality of its largest holdings, and its long-term growth outlook make this ETF stand out. Accordingly, for investors looking to put money to work in a U.S. dollar investment account, this is one of my top picks, hands down, for growth.