Late last week, the Colonial Pipeline was hit with a crippling ransomware cyber attack that crippled its operations. The situation was dire, as the pipeline supplies fuel to nearly 50% of the eastern United States. On May 13, the company reportedly paid nearly US$13 million to the hackers in untraceable cryptocurrency. Some investors may have read about the prospects of a cyber pandemic. Today, I want to discuss whether investors should be worried.
What on earth is a cyber pandemic?
The COVID-19 pandemic has led to seismic societal changes, particularly in the workspace. Millions of Canadians have been pushed away from offices and into their homes to carry out their work over the past year. This has accelerated the transformation to solely digital work. Most meetings are now conducted online through Zoom Video and familiarization with email is essential when it comes to communicating in a modern work environment.
These shifts have allowed companies to remain productive during this crisis. However, it is also a hotbed for cyber criminals and saboteurs. A bad actor intruding on a Zoom meeting pales in comparison to the damage that can be wrought by cyber criminals. The potential for an eruption in cyber crime in the wake of this transformation may lead to what some are calling a cyber pandemic.
In early 2020, I’d discussed how Canadians could invest in cyber security. Today, I want to revisit how Canadians can seek exposure to this space as cyber attacks ramp up in terms of scale.
Here’s an ETF to consider for broad exposure to cyber security
Canadians who are seeking broad exposure to the cyber security space may want to consider snagging the Evolve Cyber Security ETF (TSX:CYBR). This exchange-traded fund (ETF) seeks to replicate the performance of the Solactive Global Cyber Security Index Canadian Dollar Hedged. Shares of this ETF have dropped 5.8% in 2021 as of late-morning trading on May 14. However, the ETF is up 39% from the prior year.
Over 75% of the ETF is weighted in United States and Israel-based companies. The latter has emerged into a global leader in this space. Some of the top holdings in this ETF include Fortinet, Palo Alto Networks, Okta, and CrowdStrike. Concerns over a cyber pandemic have led to booming business for these firms. What kind of options do Canadians have on the TSX in this sector?
Two TSX stock to snatch up in this space
Last month, I’d discussed whether BlackBerry (TSX:BB)(NYSE:BB) was the top cyber security stock on the TSX. BlackBerry had a hot start in 2021 but has since faded and flattened. Still, its shares have climbed 19% in 2021. The stock is up 61% from the prior year. Will BlackBerry’s budding cyber security business benefit from a possible cyber pandemic?
The former hardware giant has made promising strides in the cyber security space. In early 2019, it completed a $1.4 billion acquisition of Cylance, and AI-based cyber security firm. Still, BlackBerry has its work cut out for it as the big dogs like Palo Alto, Okta, and CrowdStrike ride ahead of it in this sector. However, I’m still bullish on BlackBerry for the long term.
Absolute Software is a Vancouver-based company that develops, markets, and provides cloud-based endpoint visibility and control platforms for the management and security of computer devices, applications, and data for public and private entities. The stock has climbed 18% so far this year. Its shares have increased 48% compared to the same period in 2020. Absolute is well positioned to gain in a cyber pandemic.
