Technology’s Capital Market Theme: Portfolio Protection With Cyber Security

Posted on Posted in Equities

In early September, Equifax (EFX) announced a security breach that occurred back in mid-May 2017 and was discovered in late July 2017. Just yesterday, WholeFoods, a recently acquired division of Amazon (AMZN), reported a hack that may have compromised its customer data. Other high profile hacks thus far in 2017 have been Chitpotle’s (CMG) Payment System; Emergency Weather Sirens in Dallas, TX; Alphabet’s (GOOGL) Gmail Phishing Scheme; Internal Revenue Service, New York Times (NYT); Microsoft (MSFT) Windows; FedEx (FDX); Britain’s National Health Service; and Spain’s Telefonica. Price Waterhouse Coopers, leading consulting and accounting firm, reports that information security related incidents have increased 66% year-over-year since 2009. 40% of security breaches target businesses. Other targets for data breaches are medical and healthcare entities, and government and military institutions.

This problem itself is not going away and demand for its resolution has created an entire new technology industry focused on the prevention of information/data theft. To gain exposure to this capital market theme, one may consider two exchange traded funds that focus investment capital on companies, some traditional and others emerging, that are committing resources to cyber security. They are Purefunds ISE Cyber Security ETF (HACK) and First Trust Nasdaq Cybersecurity ETF (CIBR). Below are charts for each, which indicate bullish monthly trends that are currently undergoing consolidation, but supported by the underlying fundamentals of ever-increasing domestic and global cyber-security threats.

 

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