2022 Brings More Opportunity with Cybersecurity

Technology won't be the best-performing sector this year. That honor will go to energy, but there's still plenty to like about how tech performed this year.

Within that book are plenty of chapters about cybersecurity. Advisors and clients need not be tech experts to understand the importance and the relevance of the cybersecurity investment thesis. Rather, they simply need to pay just casual attention to mainstream news flow.

Put simply, 2021 was ordinary on the cybercrime front and that's not a good thing. This year, there was a seemingly never-ending stream of cyberattacks on corporations and governments, confirming the relevance of cybersecurity investment assets.

The marquee member of that fray is the First Trust Nasdaq Cybersecurity ETF (NASDAQ:CIBR), the largest and oldest ETF in this category.

“According to the FBI’s 2020 Internet Crime Report, the Bureau’s Internet Crime Complaint Center received a record number of complaints from the American public in 2020, totaling more than 791,000, with reported losses exceeding $4.1 billion,” notes Nasdaq research.

Wait, There's More

Clients seeking a tactical tech investment with long-term merit will find a lot to like with cybersecurity and for its part, CIBR is rewarding investors this year with a steady 20% gain.

“Cybercrime has been one of the most prominent storylines throughout 2021, with several highly publicized cyberattacks. These were not limited to high-tech industries. They included
targets such as a critical oil pipeline in the southeastern U.S., a meatpacking plant in Minnesota, a chain of grocery stores in the U.K., gas stations in Iran, and many others,” according to First Trust research.

Adding to the cybersecurity investment case is the fact governments around – ones with deep pockets – are awakening to the importance investing in cybersecurity before cyberattacks occur. The U.K., the European Union and, yes, Uncle Sam are planning big cybersecurity expenditures.

After numerous high-profile hacks, cybersecurity and data privacy remain a priority forgovernment officials around the world. In the U.S., the proposed federal budget for fiscal year 2022 includes $10.4 billion in new cybersecurity spending by the Department of Defense, and an additional $9.8 billion in funding to secure Federal civilian networks,” adds First Trust. “The Infrastructure Investment and Jobs Act, signed into law in November 2021, allocates nearly $2 billion in additional cybersecurity and related spending, including $1 billion earmarked for state and local governments.”

Indeed, governments have a way of disappointing investors when it comes to industry-specific spending. However, while spending targeted at some industries is a luxury, cybersecurity is a necessity and there's already evidence that governments are taking it seriously. For example, the EU's General Data Protection Regulation (GDPR) fined Amazon and WhatsApp hundreds of millions dollars this year for cybersecurity infractions. Bad for those companies, but a positive sign for investors.

Interesting Intersections

Something that's often overlooked about cybersecurity is that it is credibly part of the disruptive growth conversation. Moreover, it intersects with other innovative concepts and technologies, further supporting its long-term outlook.

In our view, the ongoing popularity of these trends will likely be accompanied by a heightened demand for cybersecurity solutions. But digital connectivity—supported by cloud computing, 5G mobile networks, the internet-of-things, and many other technological advances—continues to grow more pervasive in nearly all industries,” concludes First Trust.

The point: Between elevated spending and increasing use cases, the long-term future is bright for cybersecurity investments.

Related: There Might Be Value in Disruptive Growth